With the inauguration of Donald Trump as the new President of the United States, India is closely monitoring the impact of its policies on the national economy. A number of inter-ministerial talks have already taken place and ministries have been working on various strategies to offset any impact of its announcements. But for now, the government remains in wait-and-see mode, sources said.
Trump’s tariff policies remain a key watch for India, and the Union Budget 2025-26 plans to rationalize and reduce customs duties on various products in a planned review, but this should also send a positive signal to the United States regarding India’s customs policy. tariff position.
On day one, Trump signed an executive action to investigate the reasons for the United States’ trade deficit with foreign countries, which will likely include the issue of tariffs. It also announced it would impose 25% tariffs on imports from Canada and Mexico starting Feb. 1, but has not developed further tariff action plans at this time.
“President Trump’s Executive Orders 2025, issued on day one, bring both challenges and opportunities for India. While they may create strategic and economic disruption, they also provide an opportunity for India to reassess its energy policies, strengthen its public health infrastructure and reduce dependence in critical sectors,” noted Ajay Srivastava, founder of the economic think tank Global Trade Research Initiative (GTRI). in a report, adding that the many first day executive orders are just the beginning. “We should soon prepare for surprises on tariffs and trade,” he said.
Fears of a global tariff war are also growing with hopes that Trump will raise tariffs across the board on imports.
Macquarie global strategists Viktor Shvets and Kyle Liu said in a report that they expect that under Trump 2.0, average U.S. tariffs will likely double, from around 5% to around 10%. “We also continue to believe that punitive tariffs are unlikely to be applied across the board, even as a negotiating tactic,” they said.
Nomura analysts say China will likely face the largest tariff increases among the United States’ trading partners, including on many consumer goods that were not covered during Trump’s first term.
“We expect Trump to largely deliver on his campaign promises, but we believe the proposals are likely to be softened, particularly with respect to tariffs on Canada and Mexico. We forecast a cumulative increase in Chinese tariffs of 35 percentage points. Additionally, Trump will likely impose additional tariffs of 10% on many other countries in Europe and Asia and 5% on Mexico. As a result, we expect the effective tariff rate on U.S. imports to increase to approximately 10%,” they said in a report.
Trump’s other executive orders, including plans to end automatic citizenship for children born in the United States to non-citizen parents, could also have a direct impact on India, but could result in a legal challenge.
“President Donald Trump’s proposal to end automatic citizenship for children born in the United States to non-citizen parents has raised serious concerns among Indian families. This policy would directly affect thousands of children born to Indian parents holding a U.S. green card or serving as Indian diplomatic personnel, potentially altering their long-term residency and citizenship trajectories,” the GTRI memo said.
At the same time, the impact of Trump’s policies on inflation as well as the rupee should also be monitored. Some fear his policies could fuel inflation in the United States, leading to interest rates being raised by the Federal Reserve. This could have consequences for the global economy.
