India has seen limited success so far in capturing the ‘China Plus One’ strategy, while Vietnam, Thailand, Cambodia, and Malaysia have emerged as larger beneficiaries, according to a Niti Aayog report on trade.
Nonetheless, US President-elect Donald Trump’s increased tariffs, announced on China, Mexico and Canada, spell more opportunities for the country, as they will lead to huge trade diversion, and it is up to India to see what it can make of it, according to Niti Aayog CEO BVR Subrahmanyam.
“Whatever Trump has announced so far targets three countries. There are opportunities for India. The ball is coming our way. Whether we are going to catch it or drop the catch is for us to see...I think you will see some steps in the next few months,” BVR Subrahmanyam said on Wednesday at the launch of the ‘Trade Watch Quarterly’ report which seeks to give a snapshot of India’s trade developments.
Trump’s proposal
On November 26, Trump said that he would impose a 25 per cent tariff on all goods coming from Mexico and Canada and an additional 10 per cent tariff on China, above any other tariffs, after taking over on 20 January 2025. These tariffs are to clamp down on drugs and illegal immigration,
Earlier, during his election campaign, he had declared his intention to impose a 10 per cent import tariff on goods coming in from all trade partners, including India, and a 60 per cent import tariff on China, if voted to power.
Trump’s proposal of imposing a general tariff of 10 per cent will affect everybody and may not have any special impact on India, pointed out Arvind Virmani, Member, Niti Aayog. However, the 60 per cent import tariff on China provided an opportunity to Indian companies to grab in the medium and long term, he said.
The US is the largest trading partner of India, with Indian exports to the country totalling $77.51 billion and imports at $42.2 billion FY24.
The Niti Aayog report also cautioned against the EU’s Carbon Border Adjustment Mechanism (CBAM), under which the bloc will impose additional import tariffs on six carbon-intensive sectors including steel, aluminium and cement, from 2026.
“Indian firms may incur tariffs of 20-35 per cent, leading to higher costs, reduced competitiveness, and lower demand in the EU market. Additionally, compliance costs will rise due to the need for detailed emissions reporting,” it said.
The EU is India’s second-largest trading partner. In FY24, the EU accounted for exports worth $76 billion.