Five ways in which Trump’s tariffs could hit... and help India

US President Donald Trump delivered on his election promise and imposed reciprocal tariffs on 57 countries, with India facing a 27% across-the-board levy. India is placed somewhere in the middle with several Asian countries — from China, Cambodia and Vietnam to Bangladesh and Malaysia — facing higher levies.Advantage India?While exporters argue that this gives India some comparative advantage, higher import duties will push up domestic prices in the US, even with the baseline scenario of 10% duty for some countries, and dampen consumer demand. The uncertainty is already leading to some orders being put on hold, impacting factories worldwide.Estimates suggest that around two-thirds of India’s exports will bear the impact of reciprocal tariffs. The remaining, including critical sectors such as pharmaceuticals and some petroleum products, have managed to get a reprieve, at least for now. The 25% import duty on automobiles and components, which came into effect on April 3, could see a slowdown in exports. Same is the case with steel and iron products, which, too, were subjected to 25% tariff.Countries such as Vietnam and China, which are more dependent on exports, especially to the US, are staring at a bigger hit to their economies, according to analysts. In any case, apart from a 34% reciprocal tariff announced in Washington on April 2, China has to contend with the 20% additional duty imposed during Trump’s first term and the 25% tariff on several exports announced more recently.Demand dip likely globallyBut the latest announcement is expected to have a spillover effect as there will be surplus capacity in, say, the European Union, along with lower demand, making it difficult to diversify the export basket, at least immediately.Besides, the comparison must be product specific. For instance, India’s shrimp exports may be hit by consignments from Ecuador. Or, in the case of carpets, Türkiye with lower tariffs will be more competitive in the US market. medium119970216Disadvantage BangladeshWhen it comes to garments, however, Bangladesh will lose a significant part of the duty advantage it had over India, due to concessional tariffs, thanks to its status as a least developed country. Tariffs apart, Bangladesh has an edge in labour cost.Companies such as Apple, Samsung or Nike that depend on factories and vendors in multiple countries may also need to recalibrate their supply chains, especially if they have high dependence on China or Vietnam.Many companies in India and government officials view this as an opportunity for MNCs to invest more in India and accelerate the China+1 trend that started after Covid.Trade deals on fast trackWith Trump clearly signalling his intent to use the tariff bomb as a bargaining tool, the Indian government is keen to move ahead quickly to secure a trade deal with the US. It will mean lowering levies on several items of interest, such as bikes and electric vehicles to agricultural products, to find a solution to reciprocal duties.In addition, the other free trade agreements on the table, from the UK and the European Union to Oman, Australia and New Zealand, may move quickly as countries seek to reduce their dependence on the American market.Reforms need a leg upLower tariff protection for Indian companies means that they will have to increase their competitiveness and the government will have to push through with critical reforms — from labour laws to reducing logistics costs, lowering interest rates on loans and letting the rupee depreciate. medium119970232 medium119970253 medium119970261 medium119970274 medium119970283 medium119970127Smartphone manufacturing could get a boostPankaj DovalDonald Trump’s tariff announcements may end up giving India a larger share in global smartphone production from Apple and Samsung, though a more clearer picture will emerge once the US concludes its negotiations with various countries to fix final rates.There is still a chance that countries like Saudi Arabia, UAE and Brazil — which are in the 10% tariff bracket — may emerge as new competing manufacturing destinations as American electronics makers venture into low-duty locations to keep their costs and prices low to protect consumption.Apple, which nearly dominates India’s smartphone shipments of roughly $9bn to the US, will find expansion in India more attractive, considering the tariffs on New Delhi stands at 27%, compared to peak duty of 54% on China. Apple primarily makes iPhones in India and China.Through Foxconn and Tata group, Apple has been expanding in India as part of the China+1 strategy and India also enjoys an advantage in starting negotiations for a bilateral trade agreement (BTA) with the US.Indian negotiators and the electronics industry are hoping that New Delhi will be able to manage to get lower tariffs from the US during BTA talks, especially when it comes to exports of value-added products, such as smartphones, as the government positions itself as a trusted manufacturing ally for the US.“Also, support from corporations, such as Apple, Microsoft and Google, may be sought as they may be roped in as key partners to reinforce India’s pitch during BTA negotiations with Trump administration,” a key industry official told TOI.The electronics industry fears that if tariffs on India continue to remain at 27% for smartphones and other allied products, then there is a “chance that companies start setting up new manufacturing units” in countries with lower tariffs.“The shift to low-tariff countries may happen to arrest the impact of high manufacturing costs, which threaten to fuel inflation and thus reduce consumption in the US,” the official said.Key industry associations are alerting the government on the need to remain vigilant about the emergence of competing manufacturing locations beyond China and Vietnam.“Several developing countries have secured lower tariff rates compared to India, including Brazil, Türkiye, Saudi Arabia, UAE (each at 10%), and the Philippines (17%). Saudi Arabia and the UAE represent near-term threats to India’s electronics exports due to SEZs, competitive manufacturing environments and potential labour-cost advantages,” the Indian Cellular & Electronics Association said. “Brazil’s favourable tariff treatment, despite historical trade barriers, adds to strategic ambiguity and warrants careful monitoring.”When it comes to Samsung, the company has been hit hard after the US slapped a 46% tariff on Vietnam, which is the South Korean electronics major’s biggest manufacturing base. (Samsung’s exports from Vietnam to the US and other key regions are estimated at around $55bn).This, industry analysts say, may make it “more profitable and easier” for Samsung to scale up its smartphone manufacturing base in India. Samsung officials are understood to be in a huddle at the moment, weighing options.Lead illustration: Sandeep Adhwaryu