Trump's Tariffs 'Likely Positive' For India, Says Haitong

The impact of trade tariffs, which US President-elect Donald Trump promised during the campaign trail, is likely to be "positive" for India, according to a report released by Haitong International Research.

Even before assuming the White House charge, Trump has announced that he would impose tariffs on China, Mexico and Canada in a bid to stem the inflow of both migrants and drugs into the US.

"While we cannot discount political grandstanding or this being the opening salvo for future negotiations, we explore what potential tariffs may imply for the Indian market," the research arm of the Chinese investment bank stated in its report.

Trump, during the electioneering phase, had promised to impose a blanket tariff in the range of 10%-20% on all imports, and a tariff of 60% on Chinese imports. At a public address on Oct. 11, he also described India as "one of the biggest charger of tariffs", but did not mention any specific rate that he would levy on Indian imports as a reciprocal measure.

"India has been in US crosshairs for their tariffs on select US goods; however, we believe they will emerge largely unscathed from this particular event, were it to materialise," Haitong stated.

If Trump's tariff plans materialise, they might "bode well" for three Indian sectors in particular—electronic goods, textiles and pharmaceuticals, according to the research paper.

India's share in the overall electronic goods imports in the US stands at 1.8%, even though it has climbed by 491% from $1.8 billion to $10.7 billion between 2019 and 2023, Haitong said.

China and Mexico currently dominate the electronic goods import in the US, with a share of 25% and 15%, respectively. If Trump proceeds with his plan to impose tariffs on both the country, then India's electronic good exporters are poised to benefit, the report said.

As of 2023, India is one of the leading countries exporting textile and apparels to the US, commanding an 8.3% share of total imports in this sector, as per Haitong's study. Mexico has lower but still holds sizeable 5.3% share, while China commands a 26.1% share, it added.

"Considering PLI schemes targeting the textile sector, we think India has strong potential to scale up this sector domestically as well as be a beneficiary of likely tariffs on China and Mexico," the report stated.

Pharmaceuticals is one US sector where Indian imports dominate, Haitong highlighted. The amount of pharmaceutical imports from the South Asian economy stood at $9,083 in 2023, nearly thrice as compared to China's imports and twice that of Canada, it pointed out.

"Further, RFK Jr’s nomination as the Health secretary would imply an effort to control over drug prices, making it harder to pass on tariff increases to the customers," the report added. Robert F. Kennedy Jr. had entered the US presidential race with the agenda to cut prescription drug prices, but later withdrew and offered support to Trump.

"In this regard, India would benefit more than current leaders Ireland, Switzerland and Germany," Haitong noted.

Apart from the likely positive impact of Trump's tariffs on economic rivals, Indian exports are also expected to benefit from the performance-linked incentive scheme of the Narendra Modi-led government, as per the research.

Aimed to boost local production, the PLI scheme "has been well received", with global majors vying to set up manufacturing in India through the phased manufacturing program, Haitong said.

"The PLI scheme in India, coupled with infrastructure development, will set India up to be a manufacturing hub of significance. India remains well-placed to capitalise on any global supply chain shifts," it further stated.