Will the Sensex see an upswing? Trump’s new tariffs spare India but hit China, Mexico, and Canada

In a major trade policy shift, US President Donald Trump has announced new tariffs on China, Mexico, and Canada but left India out of the first wave of measures. The tariffs, set at 25% for Mexico and Canada and 10% for China, aim to tackle the US trade deficit, which these countries significantly contribute to, sources reported.

According to the Research and Information System (RIS), China accounts for 30.2% of the US trade deficit, followed by Mexico at 19% and Canada at 14%. In contrast, India contributes just 3.2%, ranking ninth among deficit contributors. The decision to exclude India aligns with these figures, as the new measures primarily target countries with the highest trade imbalances with the US.

Speaking at a press briefing, Trump justified the move, stating, “We have big deficits with all three of them. One country is sending massive amounts of fentanyl, killing hundreds of thousands each year, while the other two facilitate the flow of this poison. We have about a $200 billion trade deficit with Canada and a $250 billion deficit with Mexico.”

Impact on Global Trade

The Economic Survey released on Friday highlighted India’s approach to import tariffs, which aim to balance domestic needs with global economic integration. It noted that tariff policies vary by sector, protecting sensitive industries while ensuring access to essential raw materials. India’s tariff regulations comply with WTO rules and have been continuously refined to address trade challenges.

A report from the Peterson Institute for International Economics, published on January 17, warned that a 10% US tariff on China could lead to a $55 billion loss in US GDP over four years, while China could suffer a $128 billion decline. The report also predicted a rise in inflation—by 20 basis points in the US and 30 basis points in China after an initial dip.

In December, NITI Aayog CEO BVR Subrahmanyam suggested that Trump's trade policies could create opportunities for India, potentially boosting the economy as global trade shifts due to new US tariff strategies.

With these changes now in effect from February 1, the global economic landscape is set for significant shifts, with India potentially benefiting from the altered trade dynamics.