top of page

Check your portfolio 24x7

Infinity Finserv (P) Ltd , An AMFI Registered Mutual Fund Distributor

Impact of Trump’s Tariff Policies in 2025 on India and the Global Economy

  • Gautam Danani
  • Feb 8
  • 3 min read

In 2025, former U.S. President Donald Trump has reintroduced aggressive tariff policies on key trade partners, including China, Mexico, and Canada. These actions have significant repercussions for global trade and could influence India’s economy in various ways. Let’s analyze the potential impacts and outcomes:


Overview of Trump’s Tariff Policies in 2025

  1. China:

    • A 10% tariff on imports from China has been imposed, targeting electronics, steel, and consumer goods.

    • This is part of a broader strategy to reduce the U.S. trade deficit with China.

  2. Mexico and Canada:

    • Initially, a 25% tariff was announced but temporarily deferred for 30 days. These tariffs target automobile parts, steel, and aluminum.

  3. Global Retaliation:

    • China responded with a 15% tariff on U.S. coal and LNG (Liquefied Natural Gas).

    • Canada imposed reciprocal 25% tariffs on $30 billion worth of U.S. goods.

Source: Economic Times, ETV Bharat, Reuters


Potential Impact on India

1. Trade Diversion in India’s Favor

  • Opportunities for Exports: With increased U.S. tariffs on Chinese goods, American companies may look to Indian suppliers as an alternative, especially in sectors like textiles, pharmaceuticals, and IT services.

  • Electronics Manufacturing: India could benefit from global players relocating supply chains away from China to avoid U.S. tariffs.


2. Oil and Gas Import Costs

  • Rising LNG Prices: China’s tariff on U.S. LNG could shift demand to other exporters, potentially increasing competition and prices for India.

  • Crude Oil Volatility: Tariffs often lead to fluctuations in oil prices, directly impacting India’s import bills and inflation levels.


3. Inflation and Domestic Markets

  • Global Price Surge: Higher costs of imported raw materials could indirectly push up production costs in India, affecting domestic inflation.

  • Exporters’ Gains: Exporters in India could see benefits, especially in sectors like agriculture and manufacturing, as U.S. companies seek alternatives to Chinese goods.

Global Economic Impact and Spillover Effects

1. Slower Global Growth

  • Tariff wars reduce international trade and economic activity, with the IMF predicting a potential 0.5%-1% drop in global GDP growth due to disruptions in supply chains.

  • For India, a weaker global economy might mean lower demand for its exports.


2. Shift in Trade Alliances

  • Countries like India, Vietnam, and Bangladesh might emerge as beneficiaries as global companies diversify supply chains.

  • Trade alliances could shift, with India playing a key role in the Indo-Pacific region.


3. Impact on Emerging Economies

  • A strong dollar (driven by U.S. policies) might lead to currency depreciation in emerging markets like India, increasing the cost of imports.

  • Capital outflows from emerging markets to the U.S. could pressure India’s stock markets.


India’s Response and Strategic Positioning

  1. Boosting Manufacturing:

    • Initiatives like Production Linked Incentive (PLI) schemes can attract investments and make India a stronger alternative to China in global supply chains.

  2. Strengthening Trade Ties:

    • India must strengthen bilateral trade agreements with countries like the EU, Japan, and Australia to offset potential challenges from U.S. tariff policies.

  3. Energy Diversification:

    • Diversifying energy imports through strategic partnerships with the Middle East, Russia, and renewable energy sources can mitigate risks.


Conclusion

Trump’s tariff policies in 2025 are reshaping global trade dynamics. While they pose challenges such as inflation and volatility, India has an opportunity to position itself as a preferred trade partner. However, this requires proactive policies to boost manufacturing, diversify energy imports, and build robust trade alliances.


Quote: "Tariffs may create walls, but they also open windows for those ready to innovate and adapt."

Sources:


Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully. The NAVs of the schemes may go up or down depending upon the factors and forces affecting the securities market including the fluctuations in the interest rates. The past performance of the mutual funds is not necessarily indicative of future performance of the schemes. The Mutual Fund is not guaranteeing or assuring any dividend under any of the schemes and the same is subject to the availability and adequacy of distributable surplus. Investors are requested to review the prospectus carefully and obtain expert professional advice with regard to specific legal, tax and financial implications of the investment/participation in the scheme.

Comments

bottom of page