Global trade, much like diplomacy, is an intricate dance of policies, negotiations, and economic leverage. In 2018, the world witnessed a significant disruption in this dance when the United States, under President Donald Trump, initiated a series of tariffs aimed at addressing its trade deficit and what it perceived as unfair trade practices. While the initial focus was China, the ripple effects spread worldwide — India included.
India, the world’s fastest-growing major economy at the time, found itself in a unique position. As both an ally and a trade partner of the U.S., India was initially optimistic about strengthening economic ties. However, Trump’s “America First” policy, followed by withdrawal from trade concessions like the Generalized System of Preferences (GSP), quickly turned optimism into concern.
This report provides an in-depth analysis of how Trump’s tariffs impacted India — from macroeconomic effects to the daily lives of common people, the struggles and strategies of businesses, and the country’s future course in global trade.
1. Understanding the Tariffs: What Were Trump’s Policies?
Before diving into the impacts, it’s crucial to understand what Trump did:
Steel and Aluminum Tariffs (2018):
25% tariff on imported steel and 10% on aluminum.
Aimed to boost U.S. manufacturing and reduce dependency on imports.
China-focused Tariffs:
Billions worth of Chinese goods were taxed, forcing U.S. companies to seek alternative suppliers — including India.
Termination of GSP for India (June 2019):
The GSP program allowed India to export around $6 billion worth of goods duty-free.
Termination affected over 2,000 product categories.
Pressure on Autos, Technology, and Pharmaceuticals:
Tariffs and restrictions on global supply chains, including auto parts, electronics, and certain pharmaceuticals.
Objective of These Moves:
Reduce U.S. trade deficits.
Push for fairer trade terms.
Encourage manufacturing jobs within the U.S.
2. Macro-Economic Impact on India
a) Trade Deficit Adjustments
India had a trade surplus with the U.S., exporting around $54 billion annually while importing about $34 billion.
Trump’s tariffs and GSP withdrawal increased costs for Indian exporters.
Exporters in sectors like textiles, jewelry, engineering goods, and leather saw shrinking profit margins.
Example: Engineering Export Promotion Council (EEPC) of India reported nearly $300 million annual losses post-GSP withdrawal.
b) Impact on Indian GDP Growth
Exports contribute about 12-15% to India’s GDP.
While the U.S. was India’s largest export destination, the loss of GSP slowed growth in key sectors.
However, India’s diversified export portfolio cushioned the blow, preventing major GDP damage.
c) Currency Volatility
Trade tensions led to global market uncertainty.
The Indian Rupee experienced depreciation, making imports costlier but somewhat benefiting exports.
3. Impact on Key Indian Sectors
a) Textiles and Garments
India’s textile industry heavily relied on the U.S. market.
Loss of GSP translated into a 6-7% price hike for Indian textile exports.
Compounded by rising raw material costs due to global steel and aluminum tariffs.
Case Study: Tiruppur, Tamil Nadu — known as India’s “knitwear capital” — reported export order reductions and factory under-utilization.
b) Jewelry and Precious Stones
India is a major exporter of polished diamonds and gold jewelry.
Higher duties in the U.S. reduced price competitiveness.
Exporters faced squeezed margins or passed costs to consumers.
c) Automobile Components
Indian auto-component makers faced both direct and indirect impacts.
Steel and aluminum tariffs globally raised input costs.
Reduced global demand as tariffs made vehicles costlier worldwide.
d) Agriculture
India responded to U.S. tariffs by imposing retaliatory duties on American almonds, apples, and walnuts.
This protected Indian farmers but also led to price fluctuations in imported goods.
Indian agricultural exports like spices, seafood, and basmati rice faced indirect impacts due to global trade slowdown.
e) Information Technology and Services
India’s IT sector remained largely insulated.
However, “America First” rhetoric pushed for tighter H-1B visa norms, indirectly impacting Indian IT workers and companies like Infosys and TCS.
4. Impact on Indian Businesses
a) Small and Medium Enterprises (SMEs)
SMEs, especially exporters dependent on GSP benefits, faced cost escalation and shrinking global demand.
Lack of buffer capital made it difficult to absorb new tariffs.
Some SMEs shut down, while others explored new markets.
Example: An SME exporter of auto components in Pune reported 30% drop in orders from the U.S.
b) Large Corporates and Multinationals
Large Indian companies diversified their exports towards the EU, Middle East, and Southeast Asia.
Multinationals like Apple increased investment in Indian manufacturing to reduce dependency on China.
c) Agricultural Traders
Almond importers and traders in India saw prices spike by 15-20% due to retaliatory tariffs.
Local growers of similar products benefited marginally.
d) Logistics and Freight Companies
Increased global shipping costs and longer trade routes led to higher operating expenses.
5. Impact on Common People in India
a) Consumers
Price hikes on premium American goods (Harley Davidson bikes, iPhones, almonds, walnuts).
Limited direct impact on daily essentials as India sources them from diverse markets.
b) Farmers
Protected from cheaper U.S. agricultural imports due to retaliatory tariffs.
However, input costs (fertilizers, farm machinery) rose due to global steel prices.
c) Workers and Labor
Export-dependent sectors like textiles and jewelry saw temporary layoffs and wage cuts.
Auto parts and engineering goods workers faced reduced shifts.
Costlier imports raised prices for certain manufactured goods, slightly impacting middle-class consumers.
6. Indirect and Long-Term Impacts
a) Shift in Global Supply Chains
U.S. companies started shifting from China to alternative markets, including India.
Benefited Indian electronics assembly and manufacturing sectors.
Example: Apple ramped up iPhone production in India through Wistron and Foxconn.
b) Make in India Initiative Boost
Tariffs aligned with India’s push for local manufacturing.
Indian government capitalized by offering incentives to global manufacturers.
c) Strengthened Trade Relations with Other Nations
India accelerated Free Trade Agreement (FTA) talks with the EU and Australia.
Regional Comprehensive Economic Partnership (RCEP) debates intensified, though India eventually opted out for strategic reasons.
d) Technological Self-Reliance
Rising costs of imported components led Indian companies to invest in local supply chains.
Boost to “Atmanirbhar Bharat” (self-reliant India) mission.
7. Future Outlook for India Post-Tariff Era
a) Post-Trump Stability
Under President Biden, some tariff policies remained, but tone softened.
India–U.S. trade discussions resumed for GSP restoration and new trade deals.
b) Resilience Building
Indian exporters diversified markets and improved value chains.
Investment in technology and automation accelerated.
c) Opportunities for Growth
India positioned itself as a “China plus one” destination.
Potential to increase exports in pharmaceuticals, textiles, machinery, and electronics.
d) Challenges Ahead
Continued global protectionism could disrupt recovery.
Need for improving ease of doing business and logistic efficiency.
Impact of Trump Tariffs on India: Full Report
1. Background: What Happened?
In 2018–2019, Trump started a trade war with China and also reviewed trade relationships with other countries, including India.
India was the largest beneficiary of the U.S. GSP (Generalized System of Preferences), exporting about $6 billion worth of goods to the U.S. duty-free.
Trump removed India from GSP, claiming India had unfair trade barriers.
2. Direct Impact on Indian Economy
a) Loss of GSP Benefits
India lost duty-free status on 2,000+ products.
Indian exporters, especially textiles, jewelry, auto parts, leather goods, and engineering products, faced higher tariffs in the U.S.
Small and medium exporters suffered the most.
Example:
Indian leather exporters saw orders drop by 15-20%.
Indian textile exports to the U.S. became 5–7% costlier.
b) Agriculture and Farmers
India retaliated with tariffs on U.S. agricultural products like almonds, walnuts, apples, which protected Indian farmers.
But equipment prices (tractors, steel-based machinery) went up because of higher global steel prices.
Impact:
U.S. almonds became more expensive in India.
Indian farmers had to pay more for imported farm equipment.
c) Indian Consumers
Harley Davidson bikes, premium U.S. products like iPhones, MacBooks, almonds, and Walnuts became more expensive.
But since India sources many essentials domestically or from other countries, the daily life impact on average consumers was moderate, not severe.
3. Indirect Impact: Hidden Effects
a) Stock Market Volatility
Global market swings affected Indian stock markets.
Faced higher input costs due to steel tariffs globally, adjusted export pricing.
Hero Cycles
Bicycle exports to the U.S. were hit, looked at EU and domestic markets.
Wistron / Foxconn (Apple suppliers)
Benefited, expanded manufacturing units in India.
Indian Textile SMEs
Lost GSP advantage, saw order cuts from U.S. clients.
Agricultural Exporters
Shrimp, spices continued exports but margins tightened due to global freight costs.
Trump Tariffs Impact on India │ ├── Losses │ ├── Removal from GSP (Textiles, auto parts hit) │ ├── Increased input costs (steel, machinery) │ ├── SME exporters struggled │ └── Higher prices for imported U.S. goods │ ├── Gains │ ├── U.S.-China trade war opened new export doors │ ├── Apple, Samsung expanded manufacturing in India │ ├── Boost to ‘Make in India’ │ └── Stronger ties with alternative trade partners
Trade Partner
Trade Status Post-Tariffs
Key Sectors
Notes
USA
Reduced dependence, still significant
Pharma, IT, Textiles
Tariffs hit textile & auto exports but IT services remain strong
China
Complex relationship
Electronics, Raw materials
Increasing imports for manufacturing needs
UAE
Growing
Energy, Gems & Jewelry
India uses UAE as re-export hub
EU (Germany, France, Netherlands)
Expanding
Machinery, Chemicals, Apparel
EU-India trade talks active
Australia
Growing rapidly (Ind-Aus ECTA signed)
Agriculture, Education, Minerals
Diversifying away from China
Japan
Stable & strategic
Electronics, Auto parts, Technology
Strategic Indo-Pacific ally
ASEAN (Vietnam, Indonesia, Thailand)
Growing
Electronics, Machinery, Spices
ASEAN is India’s key diversification focus
Africa (South Africa, Nigeria, Kenya)
Emerging market
Pharmaceuticals, Vehicles, Machinery
“India-Africa Forum Summit” drives exports
Russia
Increasing
Energy, Fertilizers, Defense
Discounted oil purchases post Ukraine war
Bangladesh, Nepal, Sri Lanka
Strong regional trade
Textiles, Food products, Construction materials
Regional integration benefits
Timeline of Trump’s Tariff Actions (2017–2025)
2017: Beginnings of “America First” Trade Policy
January 2017: Donald Trump sworn in as President. Announces “America First” as core policy — focus on reducing trade deficits and bringing manufacturing back to the US.
March 2017: Initiates investigations under Section 232 of the Trade Expansion Act to examine the impact of steel and aluminum imports on US national security.
April 2017: Orders a review of trade deficits with major countries including China, India, Germany, Japan.
2018: Trade War Officially Begins
March 2018:
Steel & Aluminum Tariffs
Imposes 25% tariff on steel and 10% on aluminum globally, citing national security.
India, Canada, EU, Mexico, China affected.
April 2018:
China retaliates with tariffs on 128 US products.
US proposes $50 billion tariffs on Chinese goods (tech, aerospace, machinery).
July 2018:
First wave of tariffs on $34 billion worth of Chinese imports.
China responds in kind.
August 2018:
Second round: $16 billion worth of goods.
September 2018:
Trump hits China with 10% tariffs on $200 billion worth of imports, threatening escalation.
Signals willingness to go up to $500 billion.
December 2018:
Temporary trade truce with China after G20 meeting in Argentina.
2019: Escalation & Broadening
May 2019:
Tariffs on $200 billion worth of Chinese goods rise from 10% to 25%.
Targeting electronics, clothing, machinery.
June 2019:
Threatens tariffs on Mexico over immigration concerns.
Reaches deal to avoid tariffs after Mexico promises border control measures.
August 2019:
Announces new tariffs on $300 billion of Chinese goods (consumer goods).
China retaliates with more tariffs on US goods.
December 2019:
Phase One Trade Deal talks resume with China.
Agrees to suspend new tariffs in return for Chinese commitments on agriculture purchases.
2020: Phase One Deal & Pandemic Effects
January 2020:
Phase One Deal signed with China.
China pledges to buy an additional $200 billion in US goods over 2 years.
Tariffs remain but some relief on certain goods.
March 2020:
COVID-19 pandemic disrupts global trade.
Tariff impacts soften temporarily due to global slowdown.
August 2020:
China lags behind on purchase commitments.
Trump signals further actions but focuses on re-election campaign.
October 2020:
Tariffs remain in place; trade war continues as Trump campaigns heavily on being “tough on China”.
2021: Transition to Biden, but Trump Tariffs Stay
January 2021:
Joe Biden takes office.
Trump-era tariffs on China and other countries remain.
Biden administration signals a strategic review but keeps tariffs to maintain leverage.
March–December 2021:
Some tariff exclusions are reinstated (medical goods, pandemic-related).
US maintains tough stance on China but seeks allies for joint actions.
“Trump’s aggressive tariff actions between 2018–2020 not only reshaped US-China relations but also forced a global recalibration. India, among others, seized this opportunity to diversify trade ties, reduce dependency on single markets, and promote domestic manufacturing through the ‘Make in India’ initiative.”
Conclusion
Donald Trump’s tariff policies were a mixed bag for India. In the short term, India suffered significant setbacks — loss of preferential market access, squeezed exporters, costlier imports, and job pressures in key sectors. Small businesses bore the brunt, and daily life saw marginal price hikes, especially in premium imported goods.
Yet, adversity often brings opportunity. As the global supply chain looked for alternatives to China, India emerged as a viable destination for manufacturing and exports. Boosted by its “Make in India” initiative and strategic shifts in trade alliances, India weathered the storm better than expected. In the long run, the Trump tariffs served as a wake-up call — pushing India toward self-reliance, export diversification, and deeper integration with global value chains.
Today, as global trade stabilizes, India stands better prepared not just to recover lost ground but to thrive in an increasingly multipolar trade environment.
