The US’s sweeping tariff hikes on China, Mexico, and Canada could open the floodgates for Indian exporters, creating a golden opportunity to expand their footprint in the American market.
Experts say key sectors—including agriculture, engineering, textiles, chemicals, and leather—are poised to reap the benefits. During Trump’s first term, India emerged as the fourth-largest winner from Washington’s trade war with China, and history may be about to repeat itself.
Now, with the Trump administration set to enforce fresh 25% tariffs on imports from Mexico and Canada—alongside a sharp increase in duties on Chinese imports, doubling them to 20%—India is once again poised to capitalise on shifting trade dynamics.
Will India gain from US tariffs?
According to the think tank GTRI, these new trade barriers present India with an opportunity to tap into alternative sourcing options, particularly from Canada, where key commodities may now be available at more competitive prices, new agency PTI reported.
Canada plays a crucial role in supplying essential imports that align with India’s high-demand sectors. Earlier in 2024, the US imported substantial volumes of crude petroleum oil ($103 billion), refined petroleum oil ($12.9 billion), and fertilizers ($3.1 billion) from Canada.
Other critical imports included copper cathodes ($1.3 billion), gold ($4.3 billion), ethylene polymers ($2.2 billion), and plastics ($2.1 billion).
India’s import requirements are significant across key commodities – $140.3 billion for crude oil, $ 42.5 billion for gold, $2.8 billion for copper, $2.2 billion for ethylene polymers, $1.3 billion for plastics, and $1.3 billion for fertilisers.
According to PTI, GTRI founder Ajay Srivastava: “With US tariffs likely making Canadian products more competitive in the global market, India could evaluate sourcing these commodities from Canada at potentially lower costs, strengthening its trade partnership while reducing dependence on other high-cost suppliers.”
FIEO President-designate SC Ralhan further indicated that the US tariffs on China, Mexico and Canada could create advantages for Indian exporters in sectors including agriculture, engineering, machine tools, and garments.
GTRI observed that the intensification of trade tensions could benefit India through increased exports and American investment inflows. Srivastava noted that during his initial term, Trump replaced NAFTA with USMCA in 2018-19, citing concerns about outdated provisions and adverse effects on American workers.
“Now, he is again unhappy with his own deal and has imposed 25 per cent tariffs on Canada and Mexico starting today, violating USMCA’s terms. This highlights his disregard for negotiated trade agreements. To avoid a similar situation, India should be cautious about negotiating a comprehensive FTA with the US,” he continued.
“Worse, at the negotiating table, the US may demand India not just tariff cuts but also additional concessions, such as opening government procurement, reducing agricultural subsidies, weakening patent protection, and allowing unrestricted data flows, demands India has resisted for decades,” he added.
Now, instead of pursuing a full-fledged Free Trade Agreement (FTA), Srivastava suggested that India could propose a “Zero-for-Zero Tariff” arrangement.
Under this deal, India would agree to eliminate tariffs on a wide range of US industrial products—on the condition that Washington reciprocates by removing duties on Indian exports.