Trump Sets New World Order With Tariffs, But Will India Have An Advantage?

The world order that all of us grew up with has changed. India has been hit by a 26% tariff by the US in what it has called discounted reciprocal tariffs. The number, however, has to be seen in contrast to several factors.

Relative tariffs matter, and if India is hit by even slightly lower tariffs than other exporting countries for the same product, then it has a possible advantage.

Second, negotiations are still going on, but that does make the uncertainty worse. It is likely that things could get better from here.

Finally, even if India is at a relative tariff advantage, it is not clear how higher prices will affect consumption in the US, as it surely will.

US president Donald Trump said on Wednesday (Thursday India time) that he will apply a minimum 10% tariff on all exporters to the US and slap additional duties on around 60 nations with the largest trade imbalances with the US. That includes substantially higher rates on some of the country’s biggest trading partners, such as China, which now faces a tariff of at least 54% on many goods, the European Union and Vietnam, Bloomberg reported.

The baseline import taxes will take effect after midnight Saturday, and the higher duties will kick in at 12:01 a.m. on April 9, a White House statement said. Canada and Mexico, America’s largest trading partners, already face 25% tariffs, and they will stay in place.

The move is expected to draw immediate retaliation from several US trading partners, though not from India.

It’s also a stark break from a decades-long effort following World War II to lower trade barriers as a way to foster commercial ties between nations and prevent armed conflicts, Bloomberg said.

The Markets Got It Wrong

Another takeaway — the markets have got it wrong in their predictions or expectations of Trump’s trade moves being lenient, quite badly, it appears.

Futures tied to the Dow Jones Industrial Average lost 1,069 points, or 2.5%. S&P 500 futures dropped 3.6%. Nasdaq-100 futures lost 4.5% on Thursday. Crude oil prices were down, closer to $73, while spot gold was up, closer to $3,150 per ounce, at record levels.

Mary Lovely, a senior fellow at the Peterson Institute for International Economics, told Bloomberg the tariffs Trump announced Wednesday were “much worse than we feared.” Just how they would be administered was unclear, she said, and there were “huge implications for rerouting of trade” globally.

Chinese imports could face tariffs well above 50%. A tariff rate of 54% on goods from China could lead to a 90% decrease in exports to the US by 2030, based on previous estimates by Bloomberg Economics.

The European Union will have a 20% levy, and Vietnam is seeing a 46% tariff, White House documents showed. Others slapped with larger tariffs include Japan at 24%, South Korea at 25%, India at 26%, Cambodia at 49%, and Taiwan at 32%.

Treasury Secretary Scott Bessent urged US trading partners against taking retaliatory steps against President Donald Trump’s new set of retaliatory tariffs. “I wouldn’t try to retaliate,” Bessent said in an interview Wednesday with Bloomberg Television. “As long as you don’t retaliate this is the high end of the number.”

“This is the high end of the number barring retaliation,” Bessent said. “As far as negotiations go — we’ll see.”

The Federation of Indian Export Organisations (FIEO), India's apex exporters' body, told PTI that the 26% import duty will "undoubtedly affect domestic players." FIEO’s view is that India is much better placed than many other countries, and the organisation hoped the proposed bilateral trade agreement would be concluded at the earliest, as it would provide relief from these reciprocal tariffs.

"We are much better placed compared to our key competitors such as Vietnam, China, Indonesia, Myanmar, etc. We will definitely be affected by the tariffs, but we are much better placed than many others," news agency PTI quoted FIEO’s chief Ajay Sahai as saying.

Advantage India?

Prabhu Dhamodharan, the convenor of the Coimbatore-based Indian Texpreneurs Association, told The Core Report the tariffs were a medium to long-term opportunity for India.

He said that under this framework, India’s tariff rate is 26%, which is significantly lower compared to many competing nations. In the past, India, Vietnam and Bangladesh were charged similar rates for cotton apparel.

• Vietnam – 46%

• Sri Lanka – 44%

• Bangladesh – 37%

• China – 34%

This gives India a clear advantage in cost competitiveness, particularly in textiles and apparel and can expand its market share in the U.S., driven by this tariff edge.

Ongoing trade negotiations may further enhance India’s position, particularly if India offers zero-duty import of cotton in return for sector-specific benefits in apparel exports.

The big question mark for all products that are imported into India is, of course, to see how consumers respond and whether they continue to buy at the same intensity at higher prices.

That seems logically tough to expect.

The response of US consumers, including sentiment and consumption behaviour, will play a crucial role in shaping short-term export trends. Whichever way things go, this is a new world order.

Remember, we are yet to see what these tariffs will bring in the form of retaliation and response, which will surely follow, including extending to new trading blocs and alliances.

China, Korea and Japan likely coming together is the first of those steps. More could follow, and it will be interesting to see how India navigates from here on.