India Inc looks to navigate US President Donald Trump tariff storm

Some sectors hoping to cash in on the likely void created by Canada, Mexico, China

India Inc is weighing the impact of American President Donald Trump’s first volley of tariffs unleashed on Saturday.

 

The President has signed orders to impose steep tariffs on imports from Mexico, Canada, and China. This amounts to a 25 per cent additional tariff on imports from Canada and Mexico and a 10 per cent additional tariff on shipments from China. Energy resources from Canada will have a lower tariff of 10 per cent.

 

Retaliatory measures followed almost immediately with Canada announcing a 25 per cent tariff and Mexico also threatening tariff and non-tariff measures. China is planning to challenge it at the World Trade Organization.

   

India, dubbed a “tremendous tariff maker”, has, so far, ducked tariffs from its largest trading partner. Will it be next in line or go unscathed?

 

Some sectors are cautiously optimistic, hoping to cash in on the presumptive void created by Canada, Mexico and China.

 

For India’s auto component industry, the US remains the largest export market and some industry leaders see the imposition of tariffs as an opportunity to expand their footprint in the US.

 

A senior executive from a Delhi-based auto-component firm pointed out buyers in the US might urge Indian suppliers to establish manufacturing units there to circumvent potential trade barriers.

 

“This could ultimately help expand their business base,” the person said.

 

According to the Automotive Component Manufacturers Association of India (ACMA), the industry exported gear worth $11.1 billion worldwide in the first half of 2024-25. Of this, nearly 28 per cent —$3.67 billion — was shipped to the US.

 

Trade policy analyst S Chandrasekaran says agriculture and auto components were immediate beneficiaries in India. 

 

“There is an immediate opportunity of around $20 billion food and agriculture market opening up and a large share of auto components may also get sourced from India. This is a great chance for the auto component and agricultural sectors,” he said.

 

There is also a view that China may look to reroute its goods through trade-surplus countries to the US, like the UK, and also some other markets like Vietnam, Dubai, and Singapore. 

 

According to Tiruppur Exporters’ Association (TEA) President K M Subramanian, if textiles are part of this, Indian companies are expected to see a considerable surge in orders.

 

A Delhi-based firm, however, noted that India’s share in the US’s auto component imports remained modest — 1-2 per cent — making it unlikely that Washington will take immediate restrictive measures.

 

The Indian pharma industry is also closely watching the space. In 2023-24 India’s pharma exports to the US accounted for 31 per cent of its drug exports at $8.73 billion.

 

Sudarshan Jain, director general of the Indian Pharmaceutical Alliance (IPA) which represents the large and research-driven domestic pharmaceutical companies that account for almost 80 per cent of India’s pharma exports, told Business Standard the industry was watching out.

 

Some pharma industry veterans say India will continue to have a cost advantage even if tariffs are imposed.

 

An industry executive who has headed the Indian arm of a US multinational said: “If tariffs are imposed, exporters will simply add that to the cost. This is unlikely to change much dynamics in that market.”

 

Uday Bhaskar, former director general of the Pharmaceutical Exports Promotion Council (Pharmexcil), said China was not very strong in generics and did not export much to the US.

 

“China exports largely active pharmaceutical ingredients and intermediates and chemicals. We may have a chance to export these, but then again we are dependent on China,” he said. 

 

As trade flows become realigned, there are worries of supply-chain disruptions. “India is vulnerable with rising imports from various countries and hence the situation will need to be monitored,” said Jayant Acharya, joint managing director and chief executive officer, JSW Steel.

 

Ranjan Dhar, director and vice-president (sales and marketing), ArcelorMittal Nippon Steel India, said as global trade rebalanced, China’s continued high-steel production would lead to excess supply, which it would redirect to any available market.

 

ICRA vice-president Ritabrata Ghosh said: “There are few countries other than India that can absorb large quantities of steel. So it increases the risk of a redirection of steel trade flows to high-growth markets like India, leading to continued pressure of elevated imports.”

   

(Ishita Ayan Dutt, Deepak Patel, Sohini Das, Amritha Pillay, and Shine Jacob contributed to the story) 

Reigniting hopes 

> Auto firm executives say buyers in the US might urge Indian suppliers to establish manufacturing units there 

> Pharma industry veterans believe India will continue to have a cost advantage even if tariffs are imposed

> Steel industry Executives say India must implement  strong trade measures to counter China’s excess supply

> Indian textile companies are expected to see a considerable surge in orders