Trump’s Trade Policies Peril

Global Economic Stability

Trump’s Trade Policies Peril
Global Economic Stability
© RIS, 2025

ISBN: 81-7122-186-6

Published in March 2025 by

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 Analysis
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of MEA
Europe
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(IMEC)

Contents

Preface by Professor Sachin Chaturvedi, Director General, RIS.............................................................. vii

1. Transformations in Trump’s Trade Strategy.................................................................................... 1

2. The U.S. Economy on the Road to Recovery................................................................................... 11

3. The Expanding Trade Deficit: Economic Risks and Challenges.................................................. 15

4. Assessing India’s Concerns over U.S. Trade Measures................................................................. 25

5. The Way Forward............................................................................................................................... 49

References................................................................................................................................................... 51

Appendix.................................................................................................................................................... 52
 India-Middle East- Europe Corridor (IMEC)

Preface

Professor Sachin Chaturvedi

Director General, RIS

With growing trade policy specific complexities, a renewed and comprehensive engagement with
the United States, across multiple sectors has become both necessary and indispensable. A well-
structured institutional framework at the highest level must be established to navigate a broad
spectrum of critical sectors of engagement including trade, investment, technology, and finance,
to propel bilateral economic ties forward. At the core of the current vision of the US trade policy
is the ‘America First’ strategy, which underscores a strong emphasis on revitalising domestic
manufacturing while redressing deep-rooted trade imbalances that have long affected the U.S.
economy. A significant portion of this imbalance stems from large trade deficits with China,
Canada, and Mexico, and correcting these trade dynamics is seen as a pathway to stabilising
the U.S. economy. However, if these policy adjustments manifest in punitive trade actions,
their ripple effects may extend far beyond the immediate stakeholders, influencing economies
worldwide including India.
This study has undertakes an in-depth examination of how these policy maneuvers, under
the new U.S. administration, could reshape global trade dynamics with a particular focus on
their impact on India. Based on empirical research, leveraging extensive databases from the
United Nations and various multilateral institutions, the study bring in a detailed assessment
of trade patterns with major U.S. trading partners. A key aspect of this research is an evaluation
of the feasibility of achieving the ambitious $500 billion trade target by 2030, as outlined in the
‘Mission 500’ agreement.
The empirical analysis offers valuable perspectives on India’s potential trade strategy with the
U.S. in the medium term. By shedding light on shifting global trade configurations, this study
contributes to a deeper understanding of India’s evolving economic relationship with the United
States and the broader implications of the new U.S. policy direction. I’d like to congratulate
Professor S K Mohanty and his research team for this excellent output and would also like to
acknowledge RIS Publications team led by Shri Tish Malhotra and Shri Sachin Singhal for their
efforts for timely publication of the study.

Sachin Chaturvedi

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 Trump’s Trade Policies Peril Global Economic Stability

1
Transformations in Trump’s Trade
Strategy

1. Introduction affected nations engage in retaliatory measures

T
he recent pronouncements of President (Bouët, Sall & Zheng, 2024). Reflecting on
Trump, blended with risky political historical precedents, the U.S. administration
overtones such as the conjectural has often invoked several domestic laws to
annexation of Canada and Greenland or address perceived trade disparities. However,
asserting control over the Panama Canal, a nuanced understanding of prospective
possess the latent potential to disrupt the actions under President Trump might be
delicate geostrategic balance essential for global better captured through the lens of laws such
peace. Trump 1.0 had a well-established record as the International Emergency Economic
of adopting a rigid and coercive approach to Power Act (IEEPA), Section 338 of the Tariff
settle personal ambitions with major trading Act, and Section 301 and Section 122 of the
partners, including China, Mexico, Canada, the Trade Act. This raises probing questions about
European Union, India, Japan, South Korea, the rationale behind such prospective trade
Brazil, Argentina, and Turkey. His trade policies actions, especially when the U.S. economy
were marked by a series of punitive measures, continues to thrive amidst the lingering shadow
including the imposition of steep tariffs on of a global recession that has persisted for an
key commodities such as aluminium, steel, unprecedented 17 consecutive years.
automobiles, and consumer goods, alongside In response to U.S. trade measures, most
the abrupt withdrawal of Generalized System affected countries retaliated by suspending
of Preferences (GSP) benefits. Furthermore, he agricultural imports from the U.S., striking at
compelled countries like Canada and Mexico a key sector of the American economy. Many
to renegotiate existing FTA under pressure imposed restrictions on bourbon and whisky
and extended his trade restrictions to specific imports, introducing other measures to control
industries, such as whisky. In response, several them. Following the U.S. tactics, several nations
affected nations opted for retaliatory measures levied tariffs on steel and aluminium while
to counterbalance the aggressive trade actions simultaneously seeking alternative markets
of the Trump administration. for these metals. Imports of consumer goods,
In the new term, the Trump administration’s as well as household and industrial products
resolve to initiate sweeping trade actions from the U.S., were also curtailed. Countries like
against a multitude of countries, including Mexico, Canada, and South Korea deliberately
India, potentially triggered a cascade of stalled or halted their FTA negotiations with
tremors and prolonged periods of instability as Washington (Kim, Pyo & Wood, 2018). A
coalition of like-minded nations emerged,

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 Trump’s Trade Policies Peril Global Economic Stability

actively exploring trade diversion strategies to minimize

reliance on U.S. markets. Several affected economies
The Trump
resorted to blacklisting American companies, restricting
administration’s resolve their operations within their borders. Major economic
to initiate sweeping players, including the European Union and Turkey,
imposed restrictions on U.S. automobile imports. In a bid
trade actions against a
for legal recourse, some federal governments pursued
multitude of countries, litigation at the World Trade Organization (WTO) or
including India, engaged in bilateral trade countermeasures. Many
aggrieved economies took a more targeted approach,
potentially triggered a imposing trade restrictions on politically sensitive
cascade of tremors and products and states in the U.S., such as Kentucky,
prolonged periods of Wisconsin, and Florida, to exert maximum pressure on
the Trump administration.
instability as affected
India remains a relatively minor trading partner of
nations engage in the U.S. when compared to its top trading counterparts,
retaliatory measures. which surpass India both in terms of bilateral trade
volume and the scale of their trade deficits. While India
may not be directly targeted by U.S. trade actions, it is
likely to experience indirect repercussions from measures
aimed at larger global trade players. During the Trump
1.0 administration, India faced significant trade setbacks,
most notably the revocation of its Generalized System
of Preferences (GSP) status and the imposition of high
tariffs on select products, including steel, aluminium,
and various consumer goods in 2019 (Athukorala, 2020).
A crucial concern arises when trade restrictions expand
to encompass a broader range of consumer goods, as
India remains a India has a strong foothold in this sector within the U.S.
relatively minor market and stands to suffer substantial losses in terms of
market access. In response to these punitive measures,
trading partner of the India undertook sweeping retaliatory actions against
U.S. when compared the U.S. in Trump 1.0, raising tariffs on agricultural
to its top trading commodities, food products, industrial goods, consumer
items, and phosphoric acid. Further, India imposed
counterparts, which import restrictions on certain medical devices and
surpass India both in sought alternative trade avenues, turning to Russia,
China, and the European Union to compensate for lost
terms of bilateral trade
exports to the U.S. These trade frictions persisted for an
volume and the scale of extended period but saw partial resolution under the
their trade deficits. Biden administration in 2023. However, the Trump 1.0
administration had initiated aggressive trade measures
against more than a dozen major trading partners,
ultimately reaching settlements with many after
encountering strong retaliatory pushback. If past trends

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 Trump’s Trade Policies Peril Global Economic Stability

are any indication, a potential Trump 2.0 administration

could once again revive a wave of disruptive trade
confrontations (Bremmer, 2024).

2. Continuity and Change in US Trade:

Trump 1.0 to 2.0
Former President Trump is known for his aggressive
stance on key economic issues, particularly in his
quest to reassert American dominance in the global
economy. During his Trump 1.0 campaign, he repeatedly
emphasised certain trade policies, many of which were
swiftly implemented after taking office. Among his
During the Trump most defining actions were the U.S. withdrawal from
1.0 campaign, the the Trans-Pacific Partnership (TPP), an escalated trade
war with China, and the imposition of steep tariffs on
“America First” policy several politically sensitive imports. These executive
was broadly framed to trade orders became hallmarks of his administration. In
redefine the contours of response, affected nations launched sharp and decisive
retaliatory measures, intensifying global trade tensions.
American economic and Many of these U.S. trade policies carried over into the
strategic engagement. subsequent Biden administration, leaving a lasting
impact on international trade dynamics.

Trade Actions during Trump 1.0

During the Trump 1.0 campaign, the “America First”
policy was broadly framed to redefine the contours
of American economic and strategic engagement.
It emphasised a resolute commitment to economic
nationalism, trade protectionism, and stringent migration
controls, all aimed at triggering a fundamental shift in
the United States’ relationships with its key strategic
partners. One of President Trump’s earliest executive
orders, issued in January 2017, marked the withdrawal of
the United States from the Trans-Pacific Partnership (TPP)
(Jervis, et al Eds., 2018). He justified this move by arguing
that the trade bloc would undermine the American
manufacturing sector and weaken employment prospects
across the country. The renegotiation of NAFTA was
initiated on the grounds that it was the “worst trade
deal” for the United States. The agreement was seen
as instrumental in eroding domestic employment
opportunities, leading to a forced renegotiation with
Canada and Mexico to secure more favourable terms
for the U.S. Furthermore, the Trump 1.0 administration
escalated tensions with China by launching a full-scale

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 Trump’s Trade Policies Peril Global Economic Stability

trade war, citing alleged unfair trade practices (Bown,

2021). This resulted in the imposition of tariffs on a vast
array of Chinese goods, amounting to over $360 billion
annually. These trade actions triggered significant
disruptions in global supply chains, amplifying economic
distress and deepening the global recession. Bilateral
trade was adversely affected, leading to a reduction
of bilateral trade almost up to half (Li, Balistreri &
Zhang, 2020). Furthermore, the administration placed
strong emphasis on ‘Buy American’ policies, aiming
The Trump to rejuvenate domestic manufacturing by incentivising
administration placed companies to relocate production back to U.S. soil while
strong emphasis simultaneously penalising firms that outsourced jobs to
foreign markets.
on ‘Buy American’
The administration also adopted an uncompromising
policies, aiming to stance on immigration, enforcing restrictive policies
rejuvenate domestic to tighten border security and regulate the influx of
manufacturing migrants. A key pillar of this approach was the partial
construction of the U.S.-Mexico border wall, aimed at
by incentivising curbing illegal migration. The enforcement of stringent
companies to relocate detention policies led to the consolidation of migrant
production back to holding facilities, while deportation efforts were
intensified. Moreover, the H-1B visa programme was
U.S. soil. revised, imposing stricter regulations on the entry of IT
professionals, particularly from India, as part of a broader
effort to limit skilled migration into the country.
The Trump 1.0 administration also waged an
aggressive battle on drug trafficking, enacting stringent
policies targeting both Chinese and Mexican drug
networks. Mexican cartels were officially designated
as national security threats, prompting the deployment
of National Guard troops and the reinforcement of
border security measures to curtail the flow of illicit
substances (Hanrahan, & Aroch Fugellie, 2019). Strong
legislative and enforcement steps were taken to combat
the entry of opioids and fentanyl, with a particular focus
on curbing Chinese fentanyl trafficking. Furthermore,
the administration pushed for harsher sentencing laws
for drug-related offenses, making minimum sentences
mandatory and even advocating for the death penalty
for major drug traffickers.
Throughout this period, the administration pursued
country-specific trade policies that injected a sense
of uncertainty into the global economy. A protracted

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 Trump’s Trade Policies Peril Global Economic Stability

trade and technology war unfolded with China, fuelled

by allegations of intellectual property misappropriation
and currency manipulation. These tensions led to
punitive actions against Chinese firms, notably Huawei.
Simultaneously, Mexico was threatened with tariffs
unless it took decisive action to curb illegal migration,
compelling it to sign a revised trade agreement under
the NAFTA framework. Iran was subjected to severe
sanctions on its oil exports and the withdrawal of the U.S.
from the Joint Comprehensive Plan of Action (JCPOA)
The Trump in 2018 (Heo, 2023). Even longstanding allies such as the
administration pursued European Union were drawn into trade disputes, with
country-specific threats of increased tariffs on automobiles and steel.
India, too, faced economic repercussions as its benefits
trade policies that under the Generalized System of Preferences (GSP) were
injected a sense of revoked, subjecting its steel and aluminium exports to
uncertainty into the higher tariffs. Similar trade threats continued to surface
intermittently during the early stages of the Trump 2.0
global economy. campaign, reinforcing the administration’s shift toward
A protracted trade a protectionist economic framework.
and technology war Issues during the Election Campaign
unfolded with China, During the election campaign under Trump 2.0, familiar
fuelled by allegations concerns resurfaced as Trump once again raised issues
that placed the global economy under severe strain
of intellectual property
(Klingebiel & Baumann, 2024). The new administration
misappropriation and proposed sweeping tariffs on China, Canada, and Mexico,
currency manipulation. aiming to shield domestic industries and address bilateral
trade imbalances. As part of this strategy, Canada and
Mexico were to face tariffs amounting to 25% of their
exports to the U.S., while China was subjected to a 10%
tariff on its goods entering the American market. Trump
further advocated for reciprocal tariffs on nations that
failed to uphold fair trade practices.
Migration also emerged as a central theme, with a
strong emphasis on curbing illegal immigration through
the deployment of enhanced border security measures.
Canada and Mexico risked facing stringent actions if
they failed to prevent the illicit flow of drugs into the
U.S. (Bukhari, 2025). The persistence of drug trafficking
remained a pressing concern for the U.S., particularly
with the rise of powerful cartels in Mexico. However,
the U.S. administration also pointed fingers at China and
Canada for their alleged involvement in facilitating the
influx of illicit drugs. Throughout the campaign, various

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 Trump’s Trade Policies Peril Global Economic Stability

countries were targeted for different reasons. Mexico

found itself under tariff pressure to step up efforts
against both illegal immigration and drug smuggling.
China, on the other hand, faced the looming threat of
losing its Most Favoured Nation (MFN) status due to
its failure to address bilateral trade imbalances and its
inaction in preventing the trafficking of fentanyl into
the U.S. Similarly, Canada drew Washington’s ire over
multiple issues, including its expanding trade surplus,
its perceived inability to curb illegal immigration, and
The Trump its growing role in drug trafficking activities affecting
administration’s the U.S.
policy initiatives Policy Action under Trump 2.0
have spanned an The ‘Trump 2.0’ policy agenda is consistent with the
impressive array of ‘American First’ principle by supporting domestic
industries, addressing trade imbalances, and withdrawing
sectors, incorporating financial support from various economies, institutions,
both sector-specific and sectors, all of which ripple across the globe to
and product-specific significantly impact international stakeholders while
reaffirming the interests of the U.S. The Trump
strategies. administration’s policy initiatives have spanned an
impressive array of sectors, incorporating both sector-
specific and product-specific strategies. Major policy
actions are invoked in areas such as trade, international
migration, drug trafficking, foreign aid, engagements
with international institutions, and global humanitarian
programs. The Trump policies on the global stage
are in diverse domains of regulation and diplomacy,
influencing product-specific and sector-specific trade
issues while affecting individual countries, regional
groupings, immigration patterns, drug trafficking,
foreign aid, and international institutions. The Trump
administration prioritised national and economic
interests over collaborative and humanitarian concerns,
however, these endeavours have inadvertently cast a
shadow over the domestic economy.

Policies towards Trade

The Trump administration imposed a sweeping 25%
tariff on all goods that Canada and Mexico export to the
United States. Following negotiations, this tariff was
temporarily postponed for one month, until February 4th,
2025, as both nations agreed to increase Border Security
surveillance to combat illegal drug trafficking and illegal
immigration into the United States. Meanwhile, the

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 Trump’s Trade Policies Peril Global Economic Stability

Canadian oil export sector faces a 10% tariff, primarily

due to concerns over potential fuel shortages in the
Tariffs are also region. China, in turn, will be subject to a 10% tariff on
poised to strain all exports to the U.S. Imports of steel and aluminium
products are now confronted with a 25% tariff to both
economic relations protect the domestic industry and address ongoing trade
with close trade imbalances. The imposition of such sector-specific tariffs
allies, simultaneously is expected to deeply impact countries like Canada,
Mexico, Brazil, and the European Union. In a move to
jeopardising global streamline regulations, the Trump administration has
economic stability eliminated 10 existing regulations and introduced new
and exacerbating the ones, aimed at reducing compliance costs for domestic
industries. While a reciprocal tariff system is poised
already precarious to be introduced with the goal of levelling the playing
state of the global field for U.S. exports, these policies bear significant
recession. risks. They could ignite a trade war between the U.S.
and its trading partners, a conflict that might diminish
the competitiveness and profitability of U.S. industries.
Beyond the bilateral impacts, such tariffs are also poised
to strain economic relations with close trade allies,
simultaneously jeopardising global economic stability
and exacerbating the already precarious state of the global
recession.

Sector-Specific Trade Policy

Recent executive orders by the Trump administration
The U.S. has
have subjected a wide array of sectors to critical trade
announced tariffs on policy actions. Automobile imports to the U.S. now
agricultural imports face a 25% tariff imposed on countries such as Canada
and Mexico, a measure anticipated to prompt many
to protect domestic manufacturing firms to relocate their production facilities
farmers and address within U.S. borders. Similarly, electric vehicles are also
longstanding trade subject to a 25% import tariff, a policy designed to bolster
domestic car manufacturing and invigorate the national
imbalances. auto industry. In a strategic manoeuvre, the European
Union has contemplated reducing its car prices to secure
continued market access in the United States. Moreover,
the U.S. has announced tariffs on agricultural imports
to protect domestic farmers and address longstanding
trade imbalances. In a reciprocal effort, the European
Union is exploring the import of soybeans from the U.S.
Further, several other sectors including financial services,
consumer goods, transportation, capital goods, etc. stand
to benefit from this new trade regime. Finally, a reduction
in regulatory burdens within these industries is expected
to enhance their growth prospects in the domestic market.

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 Trump’s Trade Policies Peril Global Economic Stability

In light of these developments, there is an urgent need

for a comprehensive review and introspection of policies
from all corners of the United States.

3. Executive Trade Actions: Policy Choices

for the President
The Trump administration is deeply concerned about the
growing economic activities of certain nations, whose
actions are perceived as detrimental to the economic
interests of the U.S., particularly in the realm of trade.
During his campaign, President Trump explicitly
pledged to impose a 60 per cent tariff on Chinese goods
and a 100 per cent tariff on electric vehicles manufactured
in Mexico by Chinese companies, as well as on vehicles
The constitutional directly originating from China. Furthermore, he
proposed that trade activities conducted by BRICS
authority to establish
nations, particularly those involving local currencies to
tariffs resides solely circumvent the U.S. dollar as the intervention currency
with Congress, for trade, would attract a 100 per cent tariff. Mexico and
Canada, too, faced the prospect of a 25 per cent tariff on
which retains the
all products unless they took decisive measures to curb
power to amend the the influx of drugs, migration, and fentanyl into U.S.
tariff framework territory. However, the president must carefully select
appropriate legal mechanisms to enforce these tariffs and
but has delegated initiate further measures.
its execution to the
The constitutional authority to establish tariffs resides
president. solely with Congress, which retains the power to amend
the tariff framework but has delegated its execution to
the president. However, significant adjustments to the
tariff structure, as pledged during election campaigns,
can potentially lead to intricate legal disputes but many
of them can fulfil the ambition of President Trump
(Oxford Analytica, 2024). The sweeping changes to
tariffs proposed by the Trump administration, targeting
specific trading partners, may find legal backing through
the International Emergency Economic Powers Act
(IEEPA). This statute confers the president with extensive
authority to regulate tariffs under the pretext of a national
emergency. A historical precedent was set in 1971 when
President Nixon invoked the Trading with the Enemy Act
(TWEA) to regain control over a deteriorating balance of
payments situation. Under such legislative instruments,
the president can escalate tariffs to extraordinary levels,
although with substantial risk of legal entanglements.

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 Trump’s Trade Policies Peril Global Economic Stability

Section 338 offers another legal avenue, allowing tariff

hikes up to 50 per cent, though it does not reach the 60 per
cent threshold that President Trump vowed to impose on
China during his campaign. Nonetheless, this section is
embedded with procedural complexities that render its
application cumbersome. Similarly, under Section 301, the
United States Trade Representative (USTR) must present
concrete evidence that a trading partner is intentionally
undermining U.S. rights under a trade agreement. The
USTR must also undergo a parallel process should the
trade measures require an extension beyond four years.
Section 232 permits the invocation of tariffs to address
concerns over national security, but such measures are
restricted to a duration of one year. Meanwhile, Section
122 authorises the president to raise tariffs by up to 15
These legislative
per cent for a maximum of 150 days, citing balance of
provisions collectively payments issues.
enable the president These legislative provisions collectively enable the
to impose import president to impose import restrictions on specific
sectors or products, thereby attempting to regulate the
restrictions on
trade sector systematically. Given the anticipated trade
specific sectors or restrictions articulated by the Trump administration,
products, thereby provisions like IEEPA and Section 338 appear particularly
suited for implementation. Nevertheless, it is noteworthy
attempting to regulate that none of these provisions were explicitly referenced
the trade sector in the initial executive.
systematically. The subsequent sections explore some of these pressing
issues with a structured analysis. Section 2 explores the
implications of US-initiated trade actions, particularly in
the context of an economy striving for stabilisation amid
an ongoing recovery. Section 3 highlights the persistence
of trade imbalances in the U.S. and the mounting pressure
they exert on the domestic economic landscape. Section
4 sheds light on India’s apprehensions regarding U.S.
trade actions, particularly in relation to its market access
and possible policy remedies. The last Section presents
overarching conclusions and policy recommendations.

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 Trump’s Trade Policies Peril Global Economic Stability

2
The U.S. Economy on the Road to
Recovery

T
he U.S. economy is exhibiting robust minimal, ensuring a stable contribution to the
signs of recovery, not only stabilising nation’s growth trajectory.
but also infusing renewed dynamism
With the investment ratio surpassing the
into domestic growth (Yang, 2024). Over the
savings ratio, the U.S. economy exhibits signs
past two years, the economy has surged along
of overheating, fuelling inflationary pressures.
a remarkable growth trajectory. Projections
In the post-pandemic year, particularly in
indicate that the nation’s GDP will expand
2021 and 2022, the inflationary pressure
from $21.4 trillion in 2020 to an impressive
continued to build up in the domestic
$29.2 trillion by 2024 as shown in Table 2.1. This
economy. In such a scenario, imposing import
economic resurgence has been highlighted by a
restrictions—especially on consumer goods—
robust growth rate, which reached 2.9 per cent
could exacerbate demand-pull inflation. The
in 2023 and is expected to sustain momentum
inflationary landscape presented a positive
at 2.8 per cent in 2024. Per capita income has
shift as core CPI eased from 4.1 per cent in 2023
also experienced a notable upswing, rising
to 3.2 per cent in 2024, signalling a downward
from $77,980 in 2022 to approximately $86,601
trend (Jahromi, Mihai & Yang, 2023). The
in 2024, reflecting increased prosperity.
diminishing role of agriculture, coupled with
FDI flows have remained moderately strong, the declining shares of the industrial and
with both inward and outward FDI showing manufacturing sectors, has expanded the scope
moderate growth in 2023. Since 2018, the share for the services sector to flourish. However,
of outward FDI in GDP has been on a steady rise, the contraction of production-centric sectors,
while the inward FDI share has experienced a including agriculture and manufacturing, may
persistent decline in the post-pandemic years. necessitate increased imports, exerting pressure
This divergence has led to an outflow of on the external sector.
resources, particularly from FDI sources, raising
However, while the broader economy
concerns about the sustainability of investment
demonstrates resilience, the trade sector paints
inflows. The country’s gross capital formation as
a mixed picture. Both exports and imports have
a percentage of GDP has remained moderately
grown, yet the trade deficit widened in 2024,
high, consistently oscillating between 21% and
surpassing the previous year’s figure of $773.4
22% over the past several years. The disparity
billion in 2023. The trade to GDP ratio saw a
between the gross capital formation ratio and
sharp decline from 26.5% in 2019 to 23.4% in
the gross fixed capital formation ratio has been

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 Trump’s Trade Policies Peril Global Economic Stability

Table 2.1: Macroeconomic Settings of the U.S. Economy

Variable 2017 2018 2019 2020 2021 2022 2023
GDP (current US$) (Bn) 19612.1 20656.5 21540 21354.1 23681.2 26006.9 27720.7
GDP (constant 2015 US$) (Bn) 19085.7 19651.9 20159.6 19723.6 20917.9 21443.4 22062.6
GDP growth (annual %) 2.5 3 2.6 -2.2 6.1 2.5 2.9
GDP per capita (current US$)
60.3 63.2 65.6 64.4 71.3 78 82.8
(Thou)
GDP per capita growth
1.8 2.4 2.1 -3.1 5.9 2.1 2.4
(annual %)
Population, total (Mn) 325.1 326.8 328.3 331.5 332 333.3 334.9
Personal remittances, paid
64.1 66.8 71.6 66.1 73.6 87 93
($Bn)
Personal remittances,
6.3 6.9 7 6.8 7.1 7.4 7.7
received ($Bn)
FDI, net outflows (% of GDP) 2.1 -0.6 0.5 1.3 1.4 1.5 1.6
FDI, net inflows (% of GDP) 1.9 1 1.5 0.6 2 1.6 1.3
GFCF (% of GDP) 21 21.3 21.3 21.6 21.3 21.4 21.4
Gross capital formation (% of
21.2 21.6 21.7 21.4 21.3 21.9 21.5
GDP)
Gross savings (% of GDP) 19 19.2 19.4 18.4 17.8 18.4 17.5
Inflation, CPI (annual %) 2.1 2.4 1.8 1.2 4.7 8 4.1
Agricultural value added (%
0.9 0.9 0.8 0.9 0.9 0 0
of GDP)
Manufacturing value added
11.2 11.3 11 10.5 10.5 0 0
(% of GDP)
Industrial value added (% of
18.3 18.5 18.1 17.3 17.6 0 0
GDP)
Services value added (% of
76.5 76.3 76.6 77.1 76.4 0 0
GDP)
Trade in services (% of GDP) 7.1 6.9 6.9 5.6 5.8 6.4 6.4
Goods imports (BoP, US$)
2356.3 2555.7 2512.4 2346.7 2849 3270.3 3108.5
(Bn)
Service imports (BoP, current
555.1 565.4 593.3 467.1 569.8 713.9 748.2
US$) (Bn)
Current account balance (%
-1.9 -2.1 -2.1 -2.8 -3.7 -3.9 -3.3
of GDP)
Continued...

12
 Trump’s Trade Policies Peril Global Economic Stability

Continued...

Goods exports (BoP, US$)

1557 1676.9 1655.1 1433.9 1765.9 2090.3 2045.2
(Bn)
Service exports (BoP, current
837.5 865.5 891.2 726.3 804.9 949.1 1026.6
US$) (Bn)
FOREX reserves (includes
451.3 449.9 516.7 628.4 716.2 706.6 773.4
gold, $Bn)
FOREX reserves in months of
1.5 1.4 1.6 2.1 2 1.7 1.8
imports
FOREX reserves minus gold
112.3 114.8 118.4 133.8 240.2 232.7 234.1
($Bn)
Exports of G&S (US$) (Bn) 2388.3 2538.1 2539.4 2151.1 2555.4 3017.4 3052.5
Exports of goods & services
12.2 12.3 11.8 10.1 10.8 11.6 11
(% of GDP)
Imports of G$S (US$) (Bn) 2931.6 3131.2 3116.7 2777.3 3415.5 3976.3 3849.8
Imports of goods and services
14.9 15.2 14.5 13 14.4 15.3 13.9
(% of GDP)
Trade (% of GDP) 27.1 27.4 26.3 23.1 25.2 26.9 24.9
Merchandise trade (% of
20.2 20.7 19.5 17.9 19.8 20.9 18.7
GDP)
Merchandise imports (current
2408.5 2614.2 2567.5 2406.9 2935.3 3371.8 3172.5
US$) (Bn)
Merchandise exports (current
1546.3 1664 1643.2 1424.9 1754.3 2065.2 2020.6
US$) (Bn)
Tariff rate, applied, simple
3.4 3.3 8.7 2.9 2.8 2.7 0
mean (%)
Tariff rate, applied, weighted
1.7 1.6 13.8 1.5 1.5 1.5 0
mean, (%)
Source: Estimated by RIS based on Comtrade, United Nations, Online.

13
 Trump’s Trade Policies Peril Global Economic Stability

2020 but demonstrated a steady recovery, reaching 26.9%

in 2022, before dipping once again to 24.9% in 2023. A
The disparity renewed trade war under a potential second Trump
administration should ideally affect the U.S. external
between the gross
sector and affect short-term growth prospects for 2025.
capital formation Meanwhile, the trade in services to GDP ratio dropped to
ratio and the a low of 5.6% in 2020 in the wake of the pandemic but has
since rebounded to 6.5% in 2023, approaching, though
gross fixed capital not yet matching, the pre-trade war level of 6.9% in 2019.
formation ratio
The Current Account Deficit (CAD) of the U.S.
has been minimal, economy expanded relentlessly between 2017 and 2020,
ensuring a stable driven by the twin shocks of an escalating trade war and
the unprecedented global pandemic (Celebi, Roeger, &
contribution to the Welfens, 2024). The lingering spillover effects of these
nation’s growth disruptions continued to exert downward pressure,
trajectory. pushing the CAD to a concerning -3.9 per cent in 2022.
Projections suggest a further deterioration, with the
CAD expected to widen to -4.2% of GDP by the third
quarter of 2024, highlighting the persistent external
vulnerabilities confronting the economy. FOREX reserves
continued their downward trajectory, slipping further
from $773.4 billion in 2023, adding to concerns about
the external sector’s performance. Compared to India,
which has long grappled with a chronic trade deficit, the
U.S. faces a precarious FOREX situation. The country has
operated on the margins, maintaining just 1.5 months’
import coverage in FOREX reserves, though this briefly
improved to 2.1 months in 2020 before declining again
to 1.8 months in 2023, a concerning development given
the potential economic uncertainties surrounding
an impending trade war. As efforts to address these
imbalances unfold, the Trump administration should
exercise caution to avoid unsettling an economy that is
otherwise on a firm path to recovery and stability.

14
 Trump’s Trade Policies Peril Global Economic Stability

3
The Expanding Trade Deficit:
Economic Risks and Challenges

T
he United States has long been a aggressive price-based competition and unfair
structurally persistent trade deficit non-price strategies.
economy, engaging in substantial trade
In 2023, total trade in the United States
imbalances with the rest of the world for
amounted to $4.88 trillion, marking a 5.4%
multiple reasons. With a remarkably high per
decline from the previous year. Exports stood
capita income of $82,000 in 2023, domestic
at $1.84 trillion, while imports were recorded
demand for imported goods, particularly
at $3.04 trillion, resulting in a widening trade
consumption-oriented products, has surged
deficit that reached a staggering $1.21 trillion as
consistently, fuelling the widening trade
shown in Figure 3.1. Over the two-decade period
deficit. The status of the U.S. dollar as the
from 2002 to 2023, the country’s exports and
world’s reserve currency further compounds
imports grew by 2.8 and 2.5 times, respectively,
this dynamic. Its strong global demand has
ultimately allowing the trade deficit to expand
led to sustained appreciation, rendering
by a similar magnitude. Global trade regimes
imports relatively cheaper while weakening the
played a crucial role in shaping the performance
competitiveness of U.S. exports.
of the external sector, significantly influencing
In pursuit of cost efficiency, numerous its trajectory. During periods of global economic
U.S. firms have strategically relocated their buoyancy, the U.S. trade sector expanded at an
production bases to offshore destinations, extraordinary pace. However, this momentum
further intensifying trade imbalances. These was abruptly disrupted with the onset of the
firms play a pivotal role in channelling exports global recession, particularly during its first
back to the U.S. mainland, thereby heightening phase, spanning from 2008 to 2016. Between
import dependence. Contrary to American 2002 and 2007, the years of economic expansion
expectations, NAFTA has reinforced the role saw exports and imports surge by over 11%
of the U.S. as a primary market for exports annually, accompanied by a parallel increase
from its partner nations, compounding trade in the trade deficit. With the advent of the
pressures. China, in particular, has adeptly recession, however, exports and imports
leveraged NAFTA economies as strategic contracted by 0.3% and 0.4%, respectively, while
production hubs, facilitating its access to the the trade deficit shrank by 0.5%. The external
U.S. market through regional trade networks. sector witnessed a partial recovery during
China has also emerged as a dominant source the second phase of the downturn, leading to
of U.S. imports, fuelling the deficit through a renewed rise in both exports and imports,

15
 Trump’s Trade Policies Peril Global Economic Stability

Figure 3.1: Rising Trade Deficit of the US since the Global Buoyancy
(in billion $)

Source: Estimated by RIS based on Comtrade, United Nations, Online.

which, in turn, fuelled the growth of the trade deficit.

During 2017-23, exports, imports, and the trade deficit
each expanded at an average rate of 2.5%. The external
In pursuit of cost sector flourished during phases of economic buoyancy,
efficiency, numerous yet it remained highly volatile, with fluctuations in
U.S. firms have trade activity closely mirroring shifts in global market
conditions. Moreover, long-standing and rapidly
strategically relocated expanding trade partnerships with certain nations
their production became key contributors to persistent trade imbalances
bases to offshore within the U.S. economy.

destinations, further The U.S. Trade Deficit with Its Leading

intensifying trade Partners
imbalances. The trade deficit of the U.S. with the world reached
alarming proportions since the post-COVID era,
surpassing the staggering mark of one trillion dollars
annually since 2021. While 2023 showed slight
improvements in the U.S. trade balance compared
to the preceding year, the country remained under
significant strain due to the unsustainable levels of its
Current Account Deficit and dwindling foreign exchange
reserves. As per World Bank data, the top eight countries
with which the U.S. recorded trade deficits collectively
accounted for an overwhelming 99.7 per cent of its total
global trade deficit in 2023 as shown in Figure 3.2.

16
 Trump’s Trade Policies Peril Global Economic Stability

India, despite registering a trade surplus of $33.8

billion with the U.S. in 2023, contributed a modest 3.2
per cent to the overall deficit, making it the ninth-largest
Global trade regimes trade surplus partner of the U.S. as shown in Figure
2. In contrast, China retained its position as the U.S.’s
played a crucial largest trade deficit partner, responsible for over 30 per
role in shaping the cent of the total trade deficit (Yu, 2020). Other major
trade surplus partners of the U.S. surpassing India,
performance of
were Germany, Japan, Italy, and Ireland (Kwon, 2024).
the external sector, Although India’s relatively modest bilateral trade surplus
significantly influencing with the U.S. might shield it from direct punitive trade
actions, it remains susceptible to the cascading effects
its trajectory. of measures targeted at larger trade surplus partners.
Empirical evidences indicate that India’s exports could
face substantial setbacks if the U.S. were to impose trade
restrictions on key partners. The U.S. registered a trade
deficit with less number of countries than a bilateral trade
surplus. With 34 trade partners, the U.S. had a trade deficit
and with 53 countries trade surplus in 2023 as shown in
Figure 3.3.

Figure 3.2: The US Trade Deficit with Key Trade Deficit Partners: Share in
Overall US Deficit, %

Source: Estimated by RIS based on Comtrade, United Nations, Online.

Note: The size of the circle refers to the share in the trade deficit of the US, the name of the countries are denoted by 3-digit
ISO and figures represent the share of a trade partner in the overall trade deficit of the US.

17
 Trump’s Trade Policies Peril Global Economic Stability

The trade landscape of the United States in 2023

exhibited a spectrum of surpluses and deficits across
various economies. The highest trade surpluses were
The external sector recorded with four key partners, the Netherlands, Great
witnessed a partial Britain, Australia, and Spain, each reflecting strong trade
deficit with the U.S. Belgium and Poland also figured
recovery during the prominently among the industrialised countries where
second phase of the the U.S. maintained a favourable trade balance. On the
downturn, leading to other hand, most Latin American and Caribbean nations
registered a trade deficit with the US, with Argentina,
a renewed rise in both Chile, and Brazil standing out as key contributors to this
exports and imports, trend. The African continent, too, saw multiple nations
which, in turn, fuelled grappling with trade deficits of varying magnitude,
with South Africa registering the most pronounced
the growth of the trade shortfall. A broad assessment of 53 nations reveals that
deficit. a significant portion of these countries hail from Europe
and Latin America and the Caribbean. Notwithstanding
this, the U.S. holds more trade surplus partnerships
than deficit-bearing ones. However, the persistent
and extensive trade deficit with several economies
across the globe suggests the possibility of underlying

Figure 3.3: The U.S. Trade Surplus with Key Trade Surplus Partners: Share
in Overall U.S. Deficit, %

Source: Estimated by RIS based on Comtrade, United Nations, Online.

Note: The size of the circle refers to the share in the trade deficit of the US, the name of the countries are denoted
by 3-digit ISO and figures represent the share of a trade partner in the overall trade deficit of the US.

18
 Trump’s Trade Policies Peril Global Economic Stability

structural imbalances, warranting a deeper and more

comprehensive investigation.
While 2023 showed
slight improvements Trade Flows, Deficits and Comparative
in the U.S. trade Sectoral Trade
A key principle in trade analysis is the necessity of
balance compared to
keeping the trade deficit-to-total trade ratio low. This
the preceding year, the ensures that the relative trade deficit declines as bilateral
country remained under trade expands, reflecting a healthier balance between
exports and imports. A decreasing trade deficit ratio
significant strain due to suggests that exports are financing a larger share of total
the unsustainable levels bilateral imports, thereby narrowing the trade gap. While
of its Current Account a substantial trade deficit with major trading partners may
raise concerns for an importing country, it is the relative
Deficit and dwindling ratio, rather than the absolute deficit, that holds greater
foreign exchange significance.
reserves. In this context, Canada, Mexico, Germany, and
China were among the trade surplus partners with the
largest absolute trade deficits with the U.S. in 2023, each
exceeding $80 billion as shown in Figure 3.4. In contrast,
countries such as Chile, India, Italy, and Malaysia
recorded relatively modest trade surpluses, each below
the $50 billion mark. Ireland and Japan occupied an

Figure 3.4: Trade Flows and Trade deficit: Is there any link?

Source: Estimated by RIS based on Comtrade, United Nations, Online.

19
 Trump’s Trade Policies Peril Global Economic Stability

intermediate position, with bilateral trade deficits

ranging between $50 billion and $80 billion.
When assessing trade deficits relative to overall
bilateral trade, distinct patterns emerge. Canada and
Mexico exhibited considerably larger trade surpluses
with the U.S. than traditional surplus economies like
China retained its
Germany and China. Mexico’s total trade with the U.S.
position as the U.S.’s stood at $777.9 billion in 2023, with a trade surplus
largest trade deficit constituting 20.6% of total trade. By comparison, the
trade deficit-to-total trade ratios for Canada, Germany,
partner, responsible for and China were recorded at 10.9%, 40.8%, and 51.9%,
over 30 per cent of the respectively. This shows that nature of trade with Mexico
total trade deficit. and Canada was much better than China and Germany
considering the trade deficit ratio.
Among countries with moderate trade surpluses,
Japan maintained a surplus ratio of 35.2%, while Ireland
had an exceptional 68.8% surplus, albeit with a lower
trade volume. India, classified as a minor trade surplus
country, registered a surplus ratio of 39.9%, lower than
Italy and Malaysia but surpassing Chile. Countries with
high trade deficit ratios (45% and above) vis-à-vis the U.S.
included China, Ireland, Italy, and Malaysia. However,
Nature of trade with countries with low trade surpluses comprised Canada,
Chile, India, and Malaysia. China and Germany were
Mexico and Canada categorised within the mid-range trade deficit ratio
was much better than bracket, with deficits between 40% and 45%.
China and Germany
Pattern of Sectoral Deficit of the U.S. with
considering the trade its Trade Surplus Partners
deficit ratio. The issue of trade deficits becomes even more
pronounced when examined at the sectoral level,
particularly in comparison to the United States’ major
trading partners. The extent of the trade surplus or deficit
varies significantly across sectors and differs from one
surplus country to another. Interestingly, there was no
single sector in which the U.S. consistently maintained
either a trade surplus or a trade deficit with all its major
trading partners. In 2023, the U.S. enjoyed a trade surplus
across multiple sectors with Canada, Mexico, and Japan,
as illustrated in Table 3.1. However, while the U.S. has
maintained a relatively strong position in agricultural
and mining trade, its performance in the manufacturing
sector has been comparatively weaker (Refer details of
exports, imports, Appendix I).

20
 Trump’s Trade Policies Peril Global Economic Stability

Within the agricultural sector, the U.S. recorded a

substantial trade surplus in animal products and fruits and
vegetables with several of its key partners. On the other
There was no single hand, it experienced trade deficits in fats and oils, as well
sector in which the as the prepared food sector. Notably, the U.S. maintained
U.S. consistently a strong surplus in animal products with China, Germany,
and Japan but faced a significant deficit with Canada.
maintained either In the fruits and vegetables sector, it registered a trade
a trade surplus or surplus with Canada, China, Germany, and Japan but
a trade deficit with suffered a large deficit with Mexico. Meanwhile, in the
prepared food sector, the U.S. consistently recorded trade
all its major trading deficits, particularly with Canada, Mexico, and Italy.
partners. In the mineral sector, the U.S. held a substantial trade
surplus with its selected trading partners. With some
of these partners such as China, Germany, Italy, and
Mexico, the U.S. struggled with comprehensive trade
deficits across multiple manufacturing sectors. However,
countries that enjoy a significant trade surplus with
the U.S. often specialise in specific industries, making
it challenging for the U.S. to find alternative sources
in the medium term. Canada remains indispensable in
agriculture, mineral fuels, and base metals; Chile excels
in chemicals and precision instruments; India dominates
textiles and gems and jewellery; Ireland is a key player
in chemicals and precision instruments; Japan holds
Canada and Mexico, expertise in machinery and automobiles; Mexico is crucial
for processed food, machinery, automobiles, precision
in particular, have
instruments, and miscellaneous manufacturing; and
emerged as critical Malaysia is a key supplier in machinery.
trade partners, each Canada and Mexico, in particular, have emerged
playing a unique and as critical trade partners, each playing a unique and
complementary role in the U.S. economy rather than
complementary role
directly competing with one another. The sectoral
in the U.S. economy analysis highlights that the U.S. remains heavily reliant
rather than directly on these surplus trade partners in key industries such
as machinery, automobiles, and precision instruments.
competing with one While the country appears to have lost its historical
another. dominance in the manufacturing sector, it continues to
maintain a strong foothold in select areas of agriculture.
Addressing the structural imbalances in U.S. foreign
trade will require a long-term approach to restore its
competitiveness on the global stage.

21
 Trump’s Trade Policies Peril Global Economic Stability

Table 3.1: Sectoral Trade Balance of the U.S. with Its Top Trade Surplus Partners
($ Billion)
1. Live Animals and Animal Products -5.7 -0.1 3.4 -0.3 -2.2 -0.6 -0.6 3.6 3.3 0.1
2. Vegetable Products 2.2 -1.1 19 1.8 -0.6 0 1.1 5.9 -8.6 0.3
3. Animal or Vegetable Fats & Oils -5.1 0 -0.8 -0.1 -0.2 0 -0.8 -0.1 0.1 -0.3
4. Prepared Foodstuff, Beverages, etc. -2.4 -0.5 -0.2 -1.4 -1.1 -0.4 -5.7 1.2 -13.1 -0.2
5. Mineral Products -102 0.4 20.5 5.6 5.8 1.2 4.5 12 21.2 0.3
6. Products of Chemicals 5.1 -15 0.4 -16 -12 -56 -5.9 0 16.2 0.5
7. Plastics & Articles thereof 3 -0.2 -15 -2.9 -0.3 0.2 -0.7 -3.3 12.8 -0.8
8. Raw Hides & Skins, Leather, etc. 0.6 0 -2.6 -0.1 -0.7 0 -2 0.1 0.1 0
9. Wood & Articles of Wood -9 0 -0.9 -0.9 -0.2 0.1 -0.1 0.8 0.3 -0.3
10. Pulp of wood or of other Fibers -1.6 0 -2.8 -0.6 0.4 0.1 -0.1 0.7 3.5 0.1
11. Textile & Textile Articles 3 0 -26.4 -0.5 -9.6 0.1 -2.6 -0.4 0.6 -0.1
12. Footwear, Headgear and
Umbrella 0.6 0 -13.7 -0.4 -0.5 0 -2.4 0.1 -1 0
13. Articles of Stone, Plaster, Cement 1.9 0 -5 -0.1 -1.4 0 -1.6 -0.4 -2.5 -0.1
14. Natural or cultured pearls,
Jewellery -3 6.4 0.4 0 -6.9 0 0.3 1.6 -4.7 0.4
15. Base Metals & Articles of Base
Metal -11.8 -0.4 -19.7 -5.9 -2.8 0.2 -2.9 -4 7.7 1.4
16. Machinery & Mechanical
Appliances 40.4 -3.9 -187 -33 -14 0.2 -14 -45 -69.8 -25
17. Vehicles, Aircraft and Vessels -5.5 -0.6 -9.7 -27 -2.1 0.1 -7.2 -49 -103 -0.2
18. Optical, Photograph &
Cinematography 6.2 -8.4 -1.4 -5.3 1.1 -7.3 -1.5 -0.2 -12.2 -2.6
19. Arms and Ammunition 0.3 0 -0.2 -0.1 0 0 -0.4 0.5 0 0
20. Miscellaneous Manufactured
Articles 2.2 -0.1 -57.2 -0.9 -1.7 0 -2.2 -0.6 -11.7 -2.2
21. Works of Art Collectors' Pieces 0 1.5 0 -0.3 0.1 0 -0.6 0 0 0
Source: Estimated by RIS based on Comtrade, United Nations, Online.

Anticipated U.S. Tariff Strategy toward

India
The trade war under the Trump administration primarily
centred on raising tariffs on select products and sectors.
Empirical observations suggest that technology-
intensive products formed the cornerstone of trade
protectionism during the Trump 1.0 regime. If the
current trade framework follows the precedent set by
the previous administration in executing trade policies,
the implications of the present U.S. tariff strategies on
India could closely resemble those experienced under
the Trump 1.0 regime from 2017 to 2021.

22
 Trump’s Trade Policies Peril Global Economic Stability

Making an accurate assessment of tariff profiles in

the U.S. proves challenging due to the lack of updated
tariff-related data in recent years. The Import-Weighted
Low-technology Tariff (IWT) of the U.S. experienced a noticeable decline
after 2019, coinciding with the height of the US-China
products faced
trade war. When analysing the IWT of the U.S. in relation
significantly higher to India—using India’s bilateral imports as a weight,
tariffs, whereas three distinct levels of tariffs for technology-intensive
products emerged during the period 2018-21 as shown
high-technology
in Table 3.2. At one extreme, low-technology products
products enjoyed faced significantly higher tariffs, whereas high-technology
minimal tariff products enjoyed minimal tariff burdens. Medium-
technology, low-technology intensive, and resource-
burdens. based agricultural products experienced moderate tariff
levels.
The IWT for low-technology products gradually
decreased from 7.2% in 2018 to 6.5% in 2021. For medium-
technology products, the IWT consistently remained over
ten times higher than that of the high-technology category,
with moderate tariffs on resource-based agricultural
goods maintaining relative stability throughout. While
tariffs for medium-technology, low-technology intensive
products, and resource-based agricultural goods trended
downward, the high-technology product group remained

Table 3.2: Import Weighted Tariff of the U.S. on India, 2018-21

(in %)
Year Primary Resource Low Medium High
Product Based Agro Technology Technology Technology
Product Intensive intensive Intensive
Product Product Product
Simple Average Tariff
2018 3.1 3.5 5.5 3.3 1.1
2019 3.1 3.5 5.6 3.3 1.0
2020 3.1 3.5 5.5 3.3 0.9
2021 3.0 3.4 5.5 3.3 1.0
Import Weighted Tariff
2018 2.0 2.0 7.2 2.2 0.2
2019 2.3 2.2 7.0 2.2 0.2
2020 2.7 2.3 6.7 2.1 0.2
2021 2.3 2.0 6.5 2.0 0.2
Source: Estimated by RIS based on Comtrade, United Nations, Online.

23
Trump’s Trade Policies Peril Global Economic Stability

virtually unchanged over the same timeframe. To

summarise, during the first Trump administration, tariff
rates followed a declining trajectory. It is, therefore,
reasonable to anticipate that a potential second Trump
administration might adopt a similar approach, avoiding
tariff increases to sustain and enhance the growing
prominence of the U.S. economy through trade.

24
 Trump’s Trade Policies Peril Global Economic Stability

4
Assessing India’s Concerns Over
U.S. Trade Measures

I
ndia has actively engaged with the Trump
administration 2.0, seeking to resolve trade and socio-
economic frictions between the two nations through
Concerned about diplomatic negotiations. Following his assumption of
office, President Trump has pursued an assertive trade
the widening trade
policy, adopting stringent measures against trading
imbalances with partners perceived to have inequitable trade arrangements
major economies, with the U.S. Concerned about the widening trade
imbalances with major economies, the administration has
the administration highlighted the need for corrective action to curb these
has highlighted the adverse trends. Beyond trade, pressing social concerns
need for corrective such as illegal migration and illicit drug trafficking
remain high on the administration’s agenda, necessitating
action to curb these stringent regulatory interventions. Of particular concern
adverse trends. to the global economic order is the evolving approach to
immigration enforcement, as demonstrated in recent cases
involving migrants from various countries, including
India. Given the U.S.’ mounting trade deficit with India
and the presence of undocumented Indian migrants,
India remains apprehensive about potential retaliatory
measures from the US.
India’s trade surplus with the U.S. has followed a rising
trajectory over the past two decades, though it remains
modest compared to several other trading partners (Dash,
2013). The growth of this surplus displayed moderate
momentum during periods of global economic buoyancy
and the early phases of the global recession. However,
a significant shift occurred between 2016 and 2023, as
the surplus expanded robustly at an average annual
growth rate of 6.5 per cent. This period, deeply marked

25
 Trump’s Trade Policies Peril Global Economic Stability

by the global recession’s lingering impact, saw India’s

bilateral trade surplus undergo a distinct transformation,
outpacing its performance during previous phases of
economic stability and recession.

Why is India to be targeted?: Is it a trade

surplus issue?
The trade balance
During the entire transition from global buoyancy to
surged both recessionary phases, India consistently maintained a trade
before and after surplus, with the singular exception of 2008 as shown in
Figure 4.1. The country’s trade surplus witnessed notable
the COVID-19
dips during three specific years: 2008, 2018, and 2022.
pandemic—a Furthermore, there were periods of stagnation in the level
coincidence rather of trade surplus, particularly during two distinct phases,
2003–2007 and 2013–2017. Despite these intermittent
than a causal setbacks, India’s trade surplus with the U.S. experienced
relationship. an extraordinary rise, increasing more than five and
a half-fold between 2003 and 2023. This remarkable
growth was especially pronounced during two periods:
2009–2013 and 2019–2021. Interestingly, the trade balance
surged both before and after the COVID-19 pandemic—a
coincidence rather than a causal relationship.
Under the Trump administration, a sharp decline
in the level of India’s trade surplus with the U.S. was
recorded in the second year of his presidency, notably
in 2018. However, this downturn was short-lived, and

Figure 4.1 India’s Trade Surplus with the US, $Bn

Source: Estimated by RIS based on Comtrade, United Nations, Online.

26
 Trump’s Trade Policies Peril Global Economic Stability

India’s bilateral trade surplus with the U.S. began a

consistent upward trajectory until the conclusion of
Trump’s tenure in 2021. This emphasises the idea that
structural transformations in trade dynamics often
require significant time, even amid a tightened trade
policy environment. A similar pattern unfolded under
The impulsive the Biden administration, repeating the trends observed
actions of a during Trump’s presidency. During the first year of
Biden’s tenure, India’s trade surplus with the U.S. surged
potential Trump 2.0 significantly, marking a period of robust gains. However,
administration may this upward trajectory was short-lived, as the surplus
lose momentum experienced a sharp downturn in the second year, only
to rebound spectacularly in the subsequent phases of his
once trade trade policy regime.
retaliations from The impulsive actions of a potential Trump 2.0
major U.S. trading administration may lose momentum once trade
partners begin to retaliations from major U.S. trading partners begin
to surface. In the short run, India could face some
surface. repercussions, given the high concentration of its export
basket to the U.S. Notably, in 2023, India’s exports
to the U.S. remained heavily skewed, with only nine
products surpassing the billion-dollar mark individually.
These products, spanning the primary, mineral, and
manufacturing sectors, collectively accounted for $36
billion out of the $75.9 billion in total bilateral exports. In
the primary sector, India faced a significant bilateral trade
deficit of $12.5 billion, driven largely by imports in the
mineral segment, although it enjoyed a favourable trade
balance of $3.6 billion in agricultural goods. Within the
manufacturing sector, India maintained a strong trade
surplus of $36.8 billion, encompassing both intermediate
and finished goods.
New policy shifts may cause temporary setbacks in
the short term, but these are often counterbalanced in
subsequent years. This resilience stems from the proactive
responses of affected countries, which include measures
such as unilateral tariff hikes, appeals to the WTO’s
dispute settlement mechanisms, and other strategic
interventions. These efforts have proven instrumental
in mitigating the adverse impacts of U.S. trade policies,
ultimately tempering the pressures exerted by the U.S.
administration.

27
 Trump’s Trade Policies Peril Global Economic Stability

Why is India a lesser Evil than China for

the US?
Under Trump 2.0, the U.S. has begun implementing
policy actions against countries with whom it runs
significant trade deficits, often alleging that these
Indeed, it is not the countries are responsible for its persistent trade
benevolence of the imbalance. Such a line of reasoning, however, proves
U.S. that underpins to be a misinterpretation when compared against the
realities encountered by numerous countries across the
its extensive imports; globe. Indeed, it is not the benevolence of the U.S. that
rather, its unwavering underpins its extensive imports; rather, its unwavering
pursuit of national pursuit of national self-interest compels it to source a
diverse array of goods from every corner of the globe.
self-interest compels Yet, the U.S. appears disinclined to differentiate between
it to source a diverse its allies and competitors in the trade arena, opting
instead to inflict measures that may cause injury to its
array of goods from
partners in direct proportion to the perceived threats
every corner of the they pose. The scale of these trade actions, while perhaps
globe. not exactly commensurate with the injuries inflicted by
its trade partners, nonetheless approximates a similar
magnitude. By conventional wisdom, one might
anticipate that China will face comparable trade actions
from the U.S., serving as the example of a country that
has not only amassed the largest trade surplus but also
When an exporting
witnessed a steady expansion in bilateral trade since its
nation positions accession to the WTO.
more of its products The U.S. has long grappled with a substantial trade
among the top-tier deficit with the global market, prompting the Trump
administration 2.0 to implement trade action to address
U.S. import items, it external sector imbalances. In such circumstances,
can earn enhanced identifying the commodities that play a pivotal role in
export revenues widening the U.S. trade gap is of paramount importance.
Among these, significant import items stand out,
and thus sustain a especially those whose values exceed the billion-dollar
considerable trade mark. Within this group, some commodities prove to be
surplus with the U.S. more vulnerable, given the high import volumes they
command. A nation achieves a notable trade relationship
with the U.S. and even garners a trade surplus by
exporting a diverse range of these key import items and
holding a dominant market share. When an exporting
nation positions more of its products among the top-tier
U.S. import items, it can earn enhanced export revenues
and thus sustain a considerable trade surplus with the
U.S. However, a nation enjoying a disproportionately
large trade surplus may find itself facing stringent policy

28
 Trump’s Trade Policies Peril Global Economic Stability

action aimed at curbing its excess advantage against the

U.S.
In Table 3, India is compared with China by examining
the differences in their trade surpluses vis-à-vis the United
India holds a modest States and exploring the reasons behind these variations
as reflected in their trade structures in the U.S. market.
share in the high-
This empirical analysis of the U.S. market differences
ranking import between India and China is undertaken to understand
segments while why policy actions are poised to impact China directly,
rather than India. India’s trade data for 2023 revealed
commanding a larger that, among the top 475 import items of the U.S. from
presence in the lower- the world, it exported 124 distinct products at 6-digit HS.
tier products among These products collectively accounted for $45.7 billion,
representing over 60% of India’s total bilateral exports to
the US’s top imports the United States. The export profile indicates that India
from the world. holds a modest share in the high-ranking import segments
while commanding a larger presence in the lower-tier
products among the US’s top imports from the world.
Although India’s share and the number of products in the
high-ranking U.S. import category are relatively limited,
these select products yielded substantial export proceeds.
Specifically, within the highest-ranking imports, India
exported only 8 from the total of 20 products, generating
In the realm of high- export proceeds of $21.7 billion, almost 47.5% of its total
exports to the United States. In contrast, in the lower-
value U.S. imports ranking segments of the US’s global imports, India’s
from around the export proceeds experienced a significant decline. This
globe, China has observed trade pattern suggests that India might benefit
from strategically targeting products that hold a higher
distinguished itself ranking among the US’s global imports.
as a leading supplier, In the realm of high-value U.S. imports from around
consistently ranking the globe, China has distinguished itself as a leading
among the top supplier, consistently ranking among the top providers
of these coveted products. As demonstrated in Table 4.1,
providers of these China’s market share within these product categories
coveted products. exhibits notable variation. According to the magnitude of
U.S. imports from the world, products have been divided
into five broad categories, while China’s export share to
the U.S. is further segmented into six distinct groups.
The data presented on China’s export penetration across
key product categories clearly reveals that its presence
in the U.S. market is profoundly entrenched. In 2023,
among the top 475 products imported by the U.S. from
global markets, China exported 338 items, representing
more than 71% of the total in this category. Moreover,

29
 Trump’s Trade Policies Peril Global Economic Stability

Table 4.1: Export share of India and China in Top ranking imports of the U.S. from
the world
India
Number of Products (No) Value ($Bn)
US imp
Rank 50 & 50 &
above 20-49 10-19 5-9 1-4 1>0 Total above 20-49 10-19 5-9 1-4 1>0 Total
1-20 2 2 1 3 8 12.5 8.3 0.6 0.3 21.7
21-50 1 6 7 14 2.6 1.7 0.7 5
51-100 6 17 23 2.7 2.5 5.2
101-200 8 7 19 34 3.1 1.6 1.9 6.6
201-475 1 3 8 31 2 45 0.8 1.5 1.3 3.4 0.2 7.2
Total 1 4 18 46 45 10 124 0.8 4.1 16.9 16 6.9 1 45.7
China
Number of Products (No) Value ($Bn)
1-20 2 2 5 2 4 15 49.2 60.7 10.3 1.9 1.1 123.2
21-50 3 2 4 4 7 1 21 30.8 6.2 9.5 4.5 2.2 0.1 53.3
51-100 1 10 7 14 5 37 3.3 18.1 6.1 6.4 0.7 34.6
101-200 8 17 24 10 13 72 21.4 16.2 10.6 2.4 1.4 52
201-475 28 58 57 48 2 193 31.1 27.3 12.1 5.2 0.2 75.9
Total 42 89 92 81 29 5 338 135.8 128.5 38.3 28.8 6.4 1.2 339
Source: Estimated by RIS based on Comtrade, United Nations, Online.

of the top 20 global import items in the US, China was

responsible for exporting 15, classified at the 6-digit
Harmonized System level. Owing to their high ranking,
these 15 products generated export proceeds of $123.2
China is likely to billion, constituting 36.4% of a total of $339 billion
face direct policy in exports exclusively from the top 475 U.S. import
measures, whereas products. Across each of these broad product categories,
both the number of products and the corresponding
India might remain export proceeds from China considerably surpassed
largely unhurt due those of India. This disparity explains why U.S. imports
to its comparatively from China significantly outweigh those from India.
Consequently, if policy actions were to target these top
modest export share U.S. import items, China would be considerably more
to the U.S. vulnerable than India. In this context, India’s export
proceeds represent a mere 13.5% of those of China for
the US’s top 475 imported products. Thus, should the
Trump administration initiate trade policy actions, China
is likely to face direct policy measures, whereas India
might remain largely unhurt due to its comparatively
modest export share to the U.S.

30
 Trump’s Trade Policies Peril Global Economic Stability

Why Low Trade in the Intermediate Sector?

Amid the growing trade imbalances the U.S. faces in
The U.S.’ recently its engagement with the global economy, substantial
expectations have emerged for the Trump administration
discovered prowess
to implement assertive and transformative corrective
in the export of measures. Within the structural dynamics of the trade
mineral fuels, sector, there is a distinct focus on the end-use trade
segment, where the promotion of both imports and
a sector that exports of primary goods is deemed essential. This
has witnessed approach aligns with the U.S.’ recently discovered
remarkable growth in prowess in the export of mineral fuels, a sector that has
witnessed remarkable growth in recent years. Equally
recent years. critical is the engagement in the trade of intermediate
goods, encompassing semi-processed materials and parts
and components (P&C), which are vital for sustaining
industrial supply chains. While encouraging the export
of final goods remains a priority, the import of finished
consumer goods must be curtailed to the bare minimum.
In this context, an analysis of India’s trade linkages with
the U.S. becomes both relevant and critical.
In 2023, bilateral trade between India and the U.S.
Beyond the primary reached an impressive $117.8 billion, with India importing
sector, India goods worth $42 billion and exporting $75.8 billion as
shown in Table 4.2. India’s imports were valued at $42
achieved a trade billion, while exports reached $75.8 billion, resulting in
surplus across all a significant export surplus of $33.8 billion, a pattern
consistent with India’s historical trade dynamics with
other major trade
the U.S. Within the primary sector, however, the U.S.
segments. maintained a notable trade surplus, driven largely by its
mineral fuel exports to India. U.S. exports in this sector
amounted to $13.3 billion, leading to a sectoral surplus of
$12.5 billion. Beyond the primary sector, India achieved
a trade surplus across all other major trade segments.

Table 4.2: Trade Balance of India with the U.S. in End-Use sectors in 2023, $Bn
Sectors Imports Exports Trade Balance
1. Primary goods 13.3 0.8 -12.5
2. Intermediate goods 19.7 32.9 13.2
3. Final goods 8.7 35.5 26.8
0. Others 0.3 6.6 6.3
Overall 42 75.8 33.8
Source: Estimated by RIS based on Comtrade, United Nations, Online.

31
 Trump’s Trade Policies Peril Global Economic Stability

The intermediate goods sector emerged as the

largest contributor to trade activities, accounting for
$52.6 billion, which represented 44.7% of the bilateral
The final goods trade. In this segment, India maintained a trade surplus
of $13.2 billion. The final goods sector ranked second,
sector ranked second, encompassing 37.5% of bilateral trade, with a total trade
encompassing 37.5% value of $44.2 billion. This sector also recorded the largest
of bilateral trade, with sectoral trade surplus of $26.8 billion, contributing a
striking 79.3% of India’s overall trade surplus with the
a total trade value of U.S. However, given the pronounced trade deficit for the
$44.2 billion. This U.S. in this sector, it could become the most vulnerable
target for potential punitive measures against India.
sector also recorded
Besides, a smaller trade segment, not classified under
the largest sectoral exclusive end-use categories as defined by the UN,
trade surplus of $26.8 accounted for 5.9% of bilateral trade. In this segment,
India demonstrated an impressive trade surplus of $6.3
billion, contributing billion, representing a striking 95.5% of the sector’s
a striking 79.3% of exports to the U.S., further highlighting India’s strong
India’s overall trade trade positioning across diverse sectors.

surplus with the U.S. Detailed Trade in End-Use Section

In the overall bilateral trade between India and the U.S.
in 2023, India recorded a trade surplus of $33.8 billion,
accounting for 28.7% of the overall trade between the
two countries as shown in Table 4.3. In the trade of
primary goods, the dynamics were predominantly
skewed in favour of the U.S., with a sectoral trade balance
amounting to 88.7% of the total trade in this category. This
one-sided trade heavily underscored the US’s dominance
in the sector. Moving to the intermediate goods segment,
Despite the relatively semi-processed goods emerged as the focal point with
low volume, parts and $36.2 billion in sectoral trade, representing 68.8% of
components showed intermediate trade and contributing 30.7% to the overall
bilateral trade. Within this segment, the trade surplus of
a significant surplus, India reached 21% of the total two-way sectoral trade.
amounting to 33.7% Trade in parts and components (P&C) amounted to
of total sectoral trade. $16.6 billion, constituting 14.1% of the intermediate
trade segment. Trade in parts and components, valued
India held an edge in at $16.6 billion and represented 14.1% of intermediate
this trade segment, trade. Despite the relatively low volume, this category
showed a significant surplus, amounting to 33.7% of total
posting a sectoral trade
sectoral trade. India held an edge in this trade segment,
surplus of $5.6 billion. posting a sectoral trade surplus of $5.6 billion.
Meanwhile, the final goods trade stood out as the
largest component of the bilateral exchange, making

32
 Trump’s Trade Policies Peril Global Economic Stability

Table 4.3: Trade Balance of India with the U.S. in Parts & Components in 2023, $Bn
BEC Imports Exports Trade Balance
1. Primary goods 13.3 0.8 -12.5
2. Semi-finished goods 14.3 21.9 7.6
3. Parts & components 5.5 11.1 5.6
4. Capital goods 5.7 8.8 3.1
5. Consumption goods 2.9 26.6 23.7
0. Others 0.3 6.6 6.3
Total 42 75.8 33.8
Source: Estimated by RIS based on Comtrade, United Nations, Online.

up 37.5% of the total trade. The final consumer goods

segment dominated this category, demonstrating India’s
Maintaining a significant export strength. The final capital goods
sustainable edge in the segment, though smaller in scale, recorded a two-way
trade value of $14.6 billion, which accounted for 12.4% of
final consumer goods the bilateral trade and contributed 21.9% to India’s overall
sector could pose a trade surplus with the U.S. In comparison, India’s trade
critical challenge for surplus in two-way sectoral trade stood at a modest 21.9%.

India in its trade relations Maintaining a sustainable edge in the final consumer
goods sector could pose a critical challenge for India in its
with the U.S. This trade relations with the U.S. This segment was markedly
segment was markedly one-sided, with India firmly in the driver’s seat. India
one-sided, with India exported $26.6 billion out of a total bilateral trade value of
$29.5 billion in final consumer goods, capturing over 90%
firmly in the driver’s seat. of this trade segment. This subcategory alone accounted
for one-fourth of the overall bilateral trade and two-thirds
of the final goods trade. This segment alone generated a
sectoral trade surplus of $23.7 billion, which constituted
a remarkable 80.3% of the final goods trade and 70.1% of
India’s export focus India’s overall trade surplus with the U.S. in 2023. In the
intermediate goods segment, the parts and components
within final consumer subsector was relatively small but still contributed a
goods sector remains surplus of $5.6 billion.
concentrated in select
Advantage in Final Consumer Goods
products. In 2023, 44 Exports
products classified under Consumer final goods play a crucial role in the trade
the 6-digit HS code strategies of deficit nations seeking to address growing
imbalances with partner countries. India, a key player
accounted for 75.9% of in this domain, maintains substantial exports to the
India’s final consumer U.S., with trade in this sector spanning a wide range of
goods exports to the U.S. commodities. However, India’s export focus within this

33
 Trump’s Trade Policies Peril Global Economic Stability

sector remains concentrated in select products. In 2023, 44

products classified under the 6-digit HS code accounted
for 75.9% of India’s final consumer goods exports to the
U.S., as shown in Table 4.4. These exports totalled an
impressive $20.2 billion, contributing 26.6% to India’s
total exports to the U.S. that year.

Table 4.4: Top Final Consumer Products exported from India to the US, $Mn
HS Description Exports, $Mn Share (%) Cumulative (%)
Medicaments, mixed or unmixed
300490 6462.2 21.9 21.9
products
711319 Other precious metals 2831.5 9.6 31.5
030613 Shrimps and prawns 1811.5 6.1 37.6
630260 Toilet linen and kitchen linen, of 702.5 2.4 40.0
630419 Bedsheets and bedcovers, of cotton 519.9 1.8 41.8
160520 Shrimps and prawns 475.8 1.6 43.4
610910 T-shirts, singlets and other vests 422.7 1.4 44.8
300420 Containing other antibiotics 420.1 1.4 46.3
630492 Not knitted or crocheted, of cotton 356.2 1.2 47.5
630231 Bed linen of cotton 337.4 1.1 48.6
100630 Semi-milled or wholly milled rice 332.7 1.1 49.7
392690 Articles of plastics & other materials 330.5 1.1 50.9
711311 Of silver, whether or not plated or 324.8 1.1 52.0
940360 Other wooden furniture 324.6 1.1 53.1
620442 Women's or girls' suits, jackets, etc. 291.6 1.0 54.0
940490 Bedding and similar furnishings 280.7 1.0 55.0
620520 Men's or boys' shirts, of cotton 257.4 0.9 55.9
611120 Babies' garments, accessories 241.1 0.8 56.7
300410 Containing penicillin or derivative 192.3 0.7 57.3
620630 Women's or girls' blouses, shirts, etc 191.9 0.7 58.0
610990 Of other textile materials 191.6 0.6 58.6
210690 Food preparations, other 176.5 0.6 59.2
570110 Of wool or fine animal hair 159.5 0.5 59.8
620443 Of synthetic fibres 158.0 0.5 60.3
610510 Men's or boys' shirts, knitted 153.5 0.5 60.8
040900 Natural honey 143.4 0.5 61.3
640391 Footwear, outer soles covering ankle 140.4 0.5 61.8
420222 With outer surface of plastic sheet 133.4 0.5 62.2
Continued...

34
 Trump’s Trade Policies Peril Global Economic Stability

Continued...

570390 Of other textile materials 133.1 0.5 62.7

620462 Of cotton 128.0 0.4 63.1
90420 Fruits of the genus Capsicum or of 126.3 0.4 63.6
940320 Other metal furniture 121.4 0.4 64.0
570500 Other carpets and other textile flo 120.9 0.4 64.4
570330 Of other manmade textile materials 118.9 0.4 64.8
621142 Of cotton 118.6 0.4 65.2
620342 Of cotton 115.8 0.4 65.6
570310 Of wool or fine animal hair 112.6 0.4 66.0
732393 Of stainless steel 110.4 0.4 66.3
611420 Of cotton 109.7 0.4 66.7
420221 With outer surface of leather, of c 107.5 0.4 67.1
620449 Of other textile materials 104.6 0.4 67.4
640319 Sports footwear with outer soles 104.0 0.4 67.8
621143 Of manmade fibres 102.4 0.3 68.1
Total 20097.8 68.1
Source: Estimated by RIS based on Comtrade, United Nations, Online.

India’s exports in this sector were dominated by

44 commodities, which collectively made up 70.9% of
the total. Among these six products originated from
India’s exports in the agricultural sector, each belonging to distinct HS
the final consumer sections. This diversification makes it difficult for the
goods sector were U.S. administration to target or restrict imports from any
single HS section within this segment.
dominated by 44
The pharmaceutical sector emerged as India’s largest
commodities, which export segment, followed closely by gems and jewellery.
collectively made up The textile industry offers significant potential for India
70.9% of the total. to further expand its exports to the U.S. Other major
exports included plastic articles, leather and hides,
footwear, base metals, particularly iron and steel articles,
and miscellaneous manufactured goods such as furniture
and mattresses.
India achieved a substantial trade surplus of $26.8
billion in the final goods sector, with the consumer goods
segment playing a critical role. Exports of final consumer
goods reached $26.6 billion, generating a trade balance
of $23.7 billion, which accounted for over 70% of India’s
total bilateral trade surplus in 2023. A select group of
12 products contributed $15 billion to this segment,
underlining their strategic significance in India-U.S. trade.

35
 Trump’s Trade Policies Peril Global Economic Stability

Any trade actions targeting these products or broader

sectors such as pharmaceuticals, gems and jewellery,
fisheries, and made-up textiles could significantly affect
India’s market access in the U.S. Further, if the U.S.
enforces trade restrictions on high trade surplus trade
partners like China, Germany, Japan, South Korea,
and Mexico, India may face indirect consequences. In
particular, measures against China, Canada, or Mexico
could have a cascading impact on India’s exports, even
if India is not directly targeted.
India’s consumer goods segment is increasingly
vulnerable to trade scrutiny, given that the country
recorded its largest trade surplus with the U.S. in
2023. The trade balance tilted significantly in India’s
favour, with imports from the U.S. amounting to $2.9
billion, while exports soared to $26.6 billion. That year,
India imported 338 items and exported 748 products,
demonstrating a concentration in consumer goods
exports. The top four products accounted for 40% of the
These high-value segment, while the top 23 contributed 60%. Notably,
exports of 44 items exceeded $100 million each in 2023,
exports of India were with three surpassing the billion-dollar mark, two
largely from critical crossing half a billion, six exceeding $300 million, and
sectors such as precious the remaining 33 falling within the $100 million–$300
million range.
metals, shrimp, textiles,
These high-value exports were largely from critical
pharmaceuticals, and sectors such as precious metals, shrimp, textiles,
milled rice, together pharmaceuticals, and milled rice, together comprising
comprising over 52% over 52% of the final consumer goods export portfolio.
The 44 key products spanned 17 trade chapters, including
of the final consumer six agricultural and 38 manufacturing items. The textile
goods export portfolio. sector, which accounted for 23 of these products,
is likely to be a prime target for U.S. trade actions.
Furthermore, the evolving trade environment may
impose restrictions on high-value items, particularly
within the pharmaceuticals, fisheries, and jewellery
sectors. If trade measures extend beyond product-specific
restrictions, entire sectors such as chemical products,
made-up textiles, and wood pulp, may also face scrutiny.
If product-specific trade actions are enforced, the
pharmaceuticals, fisheries, and gems and jewellery sectors
will be the most affected. However, broader restrictions
could pose a larger threat, impacting pharmaceuticals,
gems and jewellery, textiles, and fisheries, potentially
disrupting these vital industries.

36
 Trump’s Trade Policies Peril Global Economic Stability

India’s Top Exports Shared by the Top

Suppliers of the U.S.
Understanding India’s major consumer goods exports
to the U.S. and how other significant trade surplus
economies to the U.S. interact with these commodities
is crucial. Among India’s diverse exports to the US, 44
key final consumer goods hold prominence in the sector
as shown in Table 4.5. The U.S. may scrutinise some of
these products closely, as they are also exported by other
major trade surplus countries, contributing to the U.S.

Table 4.5: Important consumer goods imports of the U.S. from India: participation
of other suppliers
($Mn)
HS CAN CHN DEU IND JPN KOR MEX WLD
030613 Shrimps and prawns 14.4 0 0.3 1923.3 0 0.2 197.5 4935.8
040900 Natural honey 17.1 0 2.9 161.1 0 0 25.1 584.7
Fruits of the genus
090420 0.3 103.9 2.1 127.5 0.9 5.4 124.6 562.9
Capsicum
Semi-milled or wholly
100630 20.1 44.7 360.2 13.2 8.8 1.8 1334.6
milled rice
160520 Shrimps and prawns 13.5 22.9 0.5 504.2 0.3 2.3 2.6 1730.8
210690 Food preparations, other 1022.9 358.4 178 120 60.3 80.7 229 6962.5
Containing penicillin or
300410 31.1 21.1 11.7 181.8 0 0 0 522.3
derivative
Containing other
300420 1359.9 194.5 21.6 476.8 49.8 1.5 0 2823.9
antibiotics
300490 Medicaments 2729.4 4144 4596.3 9168.4 2850.1 42.5 584.8 69276.9
Articles of plastics &
392690 829.1 4202.5 486.3 84.5 386.1 219.8 1840.3 11029.2
other materials
With outer surface of
420221 1 81 0.6 76.7 2.1 1.6 58.8 2414
leather
With outer surface of
420222 0.6 319.7 0.7 40.1 3.4 13 11.5 1616.2
plastic sheet
Of wool or fine animal
570110 0 2.9 0.5 181.4 0 0.1 0.1 310.1
hair
Of wool or fine animal
570310 1.1 17 0.9 116.8 0 0 0.2 163.9
hair
Of other manmade
570330 28.2 113.4 0.4 118.5 0.1 0.3 87.4 510.2
textile materials
570390 Of other textile materials 0 16 0.1 101.4 0.1 0 0 163.6
Other carpets and other
570500 0.2 117.8 2.9 106.5 0.3 0.3 1.2 255.7
textile
Men's or boys' shirts,
610510 1.6 44.9 0.1 212.6 0.6 0.5 7.7 1044.4
knitted
Continued...

37
 Trump’s Trade Policies Peril Global Economic Stability

Continued...

T-shirts, singlets and

610910 8.2 277.3 0.7 368 7.4 4.2 305.4 4881.1
other vests
610990 Of other textile materials 3.1 307.7 0.2 21.5 0.7 9.5 166.7 2050
Babies' garments,
611120 0 239.1 0 256.2 0 0.7 2.9 1239.5
accessories
611420 Of cotton 0.2 82.4 0 25.9 0.2 0.1 20.8 420.3
620342 Of cotton 3.8 296.1 0.3 123.2 13.3 0.4 748.9 4597.3
Women's or girls' suits,
620442 0.7 142.6 0.8 364.2 0.9 0.5 1.8 853.7
jackets, etc.
620443 Of synthetic fibres 14.7 538.1 1.1 126.8 1.2 0.3 4 1155.6
620449 Of other textile materials 9.3 113.2 0.7 45.6 0.4 0.1 0.1 398.8
620462 Of cotton 0.6 650.9 0.8 116 12 0.7 133.7 3894.1
Men's or boys' shirts, of
620520 2.3 138.8 0.3 262.4 3.3 3.3 27.7 1994.4
cotton
Women's or girls'
620630 0.5 86 0.2 260.4 2 0.5 6 754.4
blouses, shirts, etc.
621142 Of cotton 1.1 88.6 0.1 125.6 0.6 1.4 10 426.5
621143 Of manmade fibres 9 307 0.2 80.2 0.6 1.5 73.1 921
630231 Bed linen of cotton 0.2 189.8 1.2 761.8 0.1 0 0.2 1331.7
Toilet linen and kitchen
630260 3.2 394.5 0.2 905.8 0.6 0.4 2.2 2129.4
linen, of
Bedsheets and
630419 0.3 40.4 0 45.3 0.1 0 0.1 114.4
bedcovers, of cotton
Not knitted or crocheted,
630492 0.1 58 0.2 68.3 0.1 0 0.2 161.7
of cotton
Sports footwear with
640319 0.4 43.9 2.4 0.8 0.2 0.1 1.4 115.8
outer soles
Footwear, outer soles
640391 9.1 1082 5.9 152.5 0.2 0.2 204.1 3897
covering ankle
Of silver, whether or not
711311 7.6 197.8 7.8 342.9 1.2 0.9 39.5 1611.5
plated
711319 Other precious metals 127.2 240.3 53.3 2635.2 31.5 147.8 216.4 11139.1
732393 Of stainless steel 6 1831.8 3.3 169.8 2.6 5.4 7 2214.8
940320 Other metal furniture 632.9 2846.2 61.1 157.2 6.2 64.2 950.9 6806
940360 Other wooden furniture 416.8 1172 57.5 337.8 3.3 6.4 479.8 6684.5
Bedding and similar
940490 51.4 2126.1 5.7 312.3 2.3 6.3 157.6 3009.8
furnishings
Source: Estimated by RIS based on Comtrade, United Nations, Online.

Note: India’s Key Exports of Consumer Goods to the U.S. and Major Competing Exporting Countries

38
 Trump’s Trade Policies Peril Global Economic Stability

trade deficit. However, if certain countries do not export

these goods to the US, the risk of punitive trade actions
diminishes, reducing potential threats to India’s trade
interests. In this context, seven countries, including India,
have been identified as having substantial trade surpluses
with the U.S. and were part of the targeted watch group
under the Trump administration. Apart from India, these
India’s principal final countries include Canada, China, Germany, Japan, South
Korea, and Mexico.
consumer goods
India’s principal final consumer goods exports face
exports face the the greatest competitive pressure from China and, to a
greatest competitive lesser degree, from Canada and Mexico. Trade actions
pressure from China involving Germany, Japan, and South Korea are less likely
to impact India, as their export product baskets do not
and, to a lesser significantly overlap with India’s in the U.S. market. Of
degree, from Canada the 44 significant consumer goods India exports to the US,
and Mexico. a notable export share can be observed in two products
with Canada, five with Mexico, and 25 with China. In the
beverage sector, China and Mexico coexisted with India
in competition, while Canada exhibited a strong presence
in edible preparations. Specific products in categories
such as leather, footwear, and gems & jewellery might
face heightened trade action due to China’s dominance
in these segments. Similarly, in textiles and apparel, India
faces formidable challenges from China, while Mexico
emerges as a major supplier in certain product categories.
India, China, and Mexico also hold a strong foothold in
furniture and mattresses within the U.S. market. Among
the top 10 products—accounting for 48.6% of India’s final
consumer goods exports in the U.S. market—five faced
no direct competition from the US’s leading suppliers. In
the remaining five products, China exhibits a significant
presence in four of them, while Canada emerged as
important in one. Sectors such as textiles, gems and
jewellery, pharmaceuticals, and fisheries are particularly
vulnerable to targeted trade actions due to their strategic
importance and competitive positioning.

India’s trade in technology-intensive sector

Globally tradable goods are categorised based on the
level of technology embedded in the product, leading
to variations in technological intensity across different
product groups. Resource-based agro-products (RB) are
typically more processed than primary products (PP)
but less than that of low-technology-intensity products

39
 Trump’s Trade Policies Peril Global Economic Stability

Table 4.3: India’s trade with the U.S. in technology-intensive sectors

($Bn)

Tech 2017 2018 2019 2020 2021 2022 2023

Imports
1. Primary products 5.6 10.7 10.9 8.1 17.1 22.5 14.1
2. Resource Based
5.2 12.5 10.6 8.2 12.2 14.8 8.7
Agro
3. Low technology 1.7 2.0 2.0 1.1 1.3 1.6 2.9
4. Medium technology 7.4 9.5 7.9 6.2 7.3 8.4 11.0
5. High technology 3.8 4.1 3.4 2.8 3.5 4.2 5.3
Exports
1. Primary products 4.4 4.4 4.4 3.9 4.9 4.7 4.2
2. Resource Based
12.9 15.6 14.7 12.5 21.5 24.0 20.0
Agro
3. Low technology 14.2 14.4 15.3 13.7 21.8 22.6 19.8
4. Medium technology 7.7 9.8 10.4 9.0 12.7 15.8 13.8
5. High technology 6.6 7.5 9.4 10.3 10.6 12.5 18.0
Trade Balance
1. Primary products -1.2 -6.3 -6.5 -4.2 -12.1 -17.8 -9.9
2. Resource Based
7.7 3.1 4.1 4.3 9.4 9.2 11.3
Agro
3. Low technology 12.5 12.4 13.3 12.6 20.5 21.1 16.9
4. Medium technology 0.2 0.2 2.5 2.8 5.4 7.4 2.9
5. High technology 2.9 3.4 6.1 7.5 7.1 8.3 12.7
Overall
Sectoral Trade Balance 22.1 12.8 19.5 22.8 30.2 28.2 33.8
Source: Estimated by RIS based on Comtrade, United Nations, Online.

Note: Classification of technology intensive trade is based on Mohanty (2009)

(LT). The sophistication of technological application

rises notably with medium-technology (MT) and high-
technology (HT) intensive goods, which significantly
Low-technology goods outpace primary, agro-based, and low-technology
were prioritised in imports products in terms of innovation. As a result, medium-
and high-technology-intensive goods command higher
but received exceptional
returns than other product categories.
emphasis in exports,
India’s bilateral trade in technology-intensive goods
showing the significant with the U.S. in 2023 revealed distinct patterns in imports
role of blue-collar and exports as shown in Table 4.6. While primary goods
held the highest priority in imports, they were accorded
employment in India’s the least priority in exports. Conversely, resource-
manufacturing sector.
40
 Trump’s Trade Policies Peril Global Economic Stability

based agro-products commanded the highest priority

in exports but only moderate priority in imports. Low-
technology goods were prioritised in imports but received
exceptional emphasis in exports, showing the significant
role of blue-collar employment in India’s manufacturing
Among technology-
sector. Bilateral Low-technology goods exports of India
intensive product increased from $14.2 billion in 2017 to $19.8 billion in
categories, the medium- 2023. Medium-technology goods, however, experienced a
contrasting trend—imports were given very high priority,
technology-intensive while exports were moderately low. Interestingly, in
sector has consistently high-technology-intensive trade, exports of medium-
underperformed when technology goods gained moderately high priority,
although they still trailed the priority given to imports in
evaluated against other the same category. India’s exports to the U.S. experienced
segments in terms of remarkable growth in high-technology-intensive goods
sectoral trade surplus. compared to medium-technology-intensive goods
during the period 2017–2023. Exports of high-technology
products surged from $6.6 billion in 2017 to an impressive
$18 billion in 2023, while medium-technology-intensive
goods grew more modestly, rising from $7.7 billion in 2017
to $13.8 billion in 2023. This remarkable surge in high-
technology-intensive exports resulted in a substantial
trade surplus of $12.7 billion in 2023, far exceeding the
$2.9 billion surplus recorded for medium-technology-
intensive goods. Among technology-intensive product
categories, the medium-technology-intensive sector has
consistently underperformed when evaluated against
other segments in terms of sectoral trade surplus.

India’s bilateral trade The trade trajectory of primary products and

resource-based agro-products has shown a declining
surplus with the U.S. trend in imports, while medium and high-technology
has been impressive imports have surged significantly in the post-pandemic
across all technology- period. On the export front, high-technology goods have
seen consistent as well as moderate growth and have
intensive sectors, except expanded steadily, whereas primary products have
for primary goods, stagnated at low levels (Pohit & Basu, 2012). The other
where the trade balance three categories—resource-based agro-products and
low- and medium-technology goods, have displayed
has traditionally been consistent growth but have only recently gained increased
adverse. attention. India’s bilateral trade surplus with the U.S. has
been impressive across all technology-intensive sectors,
except for primary goods, where the trade balance has
traditionally been adverse. However, this deficit has
narrowed due to reduced sectoral deficits recently.
Overall, the trade surplus with the U.S. has been rising

41
 Trump’s Trade Policies Peril Global Economic Stability

since 2018, with a marginal dip in 2022, followed by a

recovery in 2023. Notably, the trade surplus in high-
The trade surplus in technology and resource-based agro sectors has been on
high-technology and the rise, while the traditionally dominant trade surplus in
the low-technology sector witnessed a decline between
resource-based agro
2022 and 2023.
sectors has been on
the rise, while the Where is India’s Advantage in Sectoral
traditionally dominant Trade?
Bilateral trade between India and the United States has
trade surplus in
yet to reach its full potential, given the magnitude of its
the low-technology trade engagement with the rest of the world. This reality
sector witnessed a is evident when examining their trade patterns. In certain
HS Sections, both countries find themselves competing
decline between 2022 in specific product segments, while in other areas, they
and 2023. exhibit significant complementarities, particularly in
minerals, chemicals, plastics, base metals, and machinery,
as highlighted in Figure 4.2. Where intense competition
exists, a more calculated and strategic approach could
be adopted to foster and expand bilateral trade. The
U.S. enjoys a distinct advantage in select HS sections,
particularly in minerals, whereas India maintains sectoral
supremacy in chemicals and machinery. In 2023, the U.S.
maintained a trade surplus in sectors such as minerals,

Figure 4.2: India’s Sectoral Trade with the US in 2023, $Bn

Source: Estimated by RIS based on Comtrade, United Nations, Online.

42
 Trump’s Trade Policies Peril Global Economic Stability

plastics, pulp and wood, and precision instruments, with

the most substantial surplus observed in the mineral fuel
Contrary to this segment. Conventional economic theory suggests that
expectation, the India’s primary commodity sector should be its dominant
export driver in contrast to the United States.
U.S. has maintained
Contrary to this expectation, the U.S. has maintained a
a substantial trade
substantial trade surplus over India in the primary sector.
surplus over India in Within this sector, India enjoys a surplus in agricultural
the primary sector. trade, whereas the U.S. dominates in mineral fuels.
However, since the U.S. trade surplus in mineral fuels
significantly outweighs India’s agricultural surplus, the
overall balance of the primary sector tilted in favour
of the United States. Notably, within the agricultural
sector, India commanded a trade surplus across several
HS sections, with the largest margin recorded in the
fish and crustacean segment in 2023. Meanwhile, India
However, since exhibited absolute dominance in the manufacturing
sector, where it secured a bilateral trade surplus of $38.8
the U.S. trade billion in the same year. Among the 16 HS sections
surplus in mineral classified under manufacturing, India maintained a
fuels significantly trade surplus in 11, while the U.S. had a surplus in only
four. India’s robust trade surplus within manufacturing
outweighs India’s is largely concentrated in key sectors such as chemicals,
agricultural surplus, textiles, gems & jewellery, and machinery. In terms of
the overall balance export volume, India’s leading sectors, ranked by their
size, include machinery, chemicals, gems and jewellery,
of the primary sector base metals, and automobiles (Refer Appendix I). A
tilted in favour of the disaggregated analysis of trade flows would offer deeper
insights into India’s manufacturing market access within
United States.
the U.S.
Despite facing coercive trade measures from the U.S.
under the Trump 2.0 administration, India opted for a
conciliatory approach, incorporating certain U.S. concerns
into its recent fiscal policies through the Union Budget.
This marks a departure from India’s stance under Trump
1.0, where retaliatory tariffs were imposed in response
to heightened U.S. duties on steel and aluminium. If
trade tensions were to escalate once again, India could
consider a similar strategic response to safeguard its
interests. Structurally, India holds a better position in a
broad range of product categories compared to the U.S.
Empirical analysis suggests that while the U.S. enjoys
advantages in a limited number of subsectors, India
retains the leverage to respond with countermeasures if
necessary. The U.S. has established a strong presence in

43
 Trump’s Trade Policies Peril Global Economic Stability

certain agricultural segments, notably edible fruits, nuts,

beverages, and spirits. In the mining sector, products
such as mineral fuels, slag, and ash enjoy significant
market access in India, contributing to a sizable U.S.
Structurally, trade surplus. Moreover, other key sectors such as dye
extracts for leather, plastic articles, pulp of wood, steel,
India holds a
aluminium, and precision instruments hold considerable
better position in significance for U.S. trade in India. A strategic tightening
a broad range of of India’s tariff policy in these sectors would not only
recalibrate the volume of bilateral trade but also further
product categories
reinforce India’s trade surplus with the U.S. Given this
compared to the U.S. dynamic, the U.S. would be well-advised to exercise
restraint in adopting aggressive trade measures against
India, as it has done with several other nations under
various pretexts.

Prime Minister’s Visit and US-India

COMPACT
After President Trump assumed office for his second term
in January 2025, Prime Minister Modi’s first official visit
to the United States proved to be a success, culminating
in the signing of a comprehensive agreement on February
13, 2025. This accord highlighted a shared commitment
to mutual prosperity and security, serving as a catalyst
for strengthening bilateral ties across multiple sectors.
In a move to elevate the At the core of this renewed engagement lay a concerted
strategic partnership, focus on collaborative innovation, designed to propel
Prime Minister Modi economic growth in both economies. In a move to elevate
the strategic partnership, Prime Minister Modi launched
launched the U.S.-India the U.S.-India COMPACT and “Mission 500,” aimed at
COMPACT and “Mission giving a substantial thrust to existing collaborations in
500,” aimed at giving specific sectors.

a substantial thrust to Highlighting the deepening synergy between the two

countries, Prime Minister Modi encapsulated the essence
existing collaborations in of this flourishing relationship through an equation:
specific sectors. “MAGA + MIGA = MEGA”, His vision suggested that
the fusion of Make America Great Again and Make India
Great Again would forge a MEGA partnership—one
that not only enhances economic prosperity but also
cement the global leadership stature of both nations.
The signing of the U.S.-India COMPACT (Catalysing
Opportunities for Military Partnership, Accelerated
Commerce & Technology) further reinforced this vision,
with its strategic focus on critical sectors such as defence,
trade, and technology. The agreement encompassed key
areas of defence cooperation, fostering joint research,

44
 Trump’s Trade Policies Peril Global Economic Stability

development, and production of cutting-edge military

technologies. The framework sought to elevate bilateral
trade by facilitating mutual market access and dismantling
trade barriers that hinder economic engagement. Another
Both nations launched pillar of the agreement was the promotion of innovation
‘Mission 500’, a strategic and technological advancements in frontier domains such
as artificial intelligence, quantum computing, and space
initiative set to be
exploration. Notably, it also underscored the significance
operationalised through of collaboration between academic institutions and
a Multi-sector Bilateral industry leaders, ensuring sustained momentum in these
transformative fields. As an extension of this ambitious
Trade Agreement (BTA),
framework, both nations launched ‘Mission 500’, a
further solidifying strategic initiative set to be operationalised through a
their shared economic Multi-sector Bilateral Trade Agreement (BTA), further
solidifying their shared economic and technological
and technological aspirations.
aspirations.
‘Mission 500’: A Strategic Initiative
Both countries have taken a well-calibrated step toward
strengthening their bilateral trade ties by launching
Mission 500, a comprehensive, multi-sectoral initiative that
will be implemented through a Bilateral Trade Agreement
(BTA). While a BTA shares certain similarities with a Free
Trade Agreement (FTA), subtle yet significant distinctions
set them apart. An FTA mandates the inclusion of
“substantially all trade,” whereas a BTA is more flexible,
allowing for selective coverage of key areas such as tariffs,
non-tariff barriers (NTBs), and trade facilitation. The
The multi-sectoral BTA also adheres to simplified Rules of Origin (RoO),
avoiding the complexities associated with more intricate
Bilateral Trade trade agreements. Designed with adaptability at its core,
Agreement negotiated a BTA enables targeted cooperation in specific industries,
making negotiations more seamless while allowing
with the U.S.
preferential treatment for the partner country. Despite
encompasses both its flexibility, a BTA remains fully compliant with World
goods and services, Trade Organization (WTO) provisions, ensuring access
to the Dispute Settlement Mechanism (DSM). These
forming the foundation
agreements play a pivotal role in shaping international
of an enhanced trade, carrying profound political, economic, and legal
economic partnership. ramifications for the contracting parties. Hence, a well-
structured BTA must align with broader policy objectives,
geographical imperatives, and WTO commitments of the
participating nations.
The multi-sectoral Bilateral Trade Agreement
negotiated with the U.S. encompasses both goods and

45
 Trump’s Trade Policies Peril Global Economic Stability

services, forming the foundation of an enhanced economic

partnership. As per the agreement, the initial phase is
projected to be completed by the fall of 2025, marking
a significant milestone in bilateral trade relations. This
structured framework seeks to deepen collaboration in
emerging industries while fostering greater integration
of supply chains across diverse sectors. The agreement
strategically enhances market access for U.S. exports of
industrial goods to India while simultaneously bolstering
India’s exports of labour-intensive products to the
U.S. Moreover, high-tech, technology-driven sectors,
such as artificial intelligence, semiconductors, and
The agreement strategic minerals, have been earmarked for extensive
strategically enhances cooperation, highlighting the increasing emphasis on
innovation-driven trade.
market access for U.S.
The ‘Mission 500’ initiative was jointly envisioned
exports of industrial during Prime Minister Modi’s visit, cementing a shared
goods to India while commitment by India and the United States to forge a
simultaneously robust economic alliance by 2030. Encompassing both
goods and services, the agreement aspires to broaden
bolstering India’s market access, lower tariffs, and cap NTBs while
exports of labour- enhancing supply chain integration across multiple
intensive products to industries. With an ambitious target of doubling bilateral
trade to $500 billion by 2030, this agreement is poised
the U.S. to establish a more balanced, inclusive, and forward-
looking trade partnership that aligns with the evolving
global economic landscape.
The signing of ‘Mission 500’ and the India-US
COMPACT has signalled deeper trade cooperation, yet
the Trump administration’s inclination toward imposing
reciprocal tariffs casts a shadow of uncertainty over
India’s access to the U.S. market. A plausible scenario
is the tightening of domestic regulations in the United
States, particularly concerning trade in services, which
could further complicate India’s export landscape.
Navigating such an evolving trade environment
demands a meticulously crafted strategy, underpinned
by robust domestic frameworks that facilitate the
development of granular, data-driven insights for both
goods and services at the bilateral level. Indian trade
agencies must channel their efforts into assembling these
detailed datasets, ensuring that policymakers have access
to precise, actionable insights to craft informed and
adaptive trade policies that safeguard national interests
in an increasingly complex global landscape.

46
 Trump’s Trade Policies Peril Global Economic Stability

Table 4.7: Mission 500: India’s Bilateral Trade Projection

($ Billion)

Exports Imports Trade Surplus Total

2023
Goods 76 41 35 117
Services 46 29 17 75
Total 122 70 52 192
2030
Goods 185 160 25 345
Services 100 55 45 155
Total 285 215 70 500
CAGR (2023-30, %)
Goods 13.6 21.5 -4.7 16.7
Services 11.7 9.6 14.9 10.9
Total 12.9 17.4 4.3 14.7
Source: RIS estimation based on UN Comtrade, Online.

The ‘Mission 500’ initiative embodies an ambitious

strategy aimed at doubling bilateral trade in goods and
The signing of ‘Mission services, with a determined goal of achieving a trade
500’ and the India- target of $500 billion by 2030. Presently, comprehensive
annual trade data for goods and services is unavailable, as
US COMPACT has the financial year 2024-25 in India is yet to be concluded.
signalled deeper trade Consequently, the most reliable data currently pertains
to 2023. To address this gap, a diligent effort has been
cooperation, yet the
made to collate trade-related information from a variety
Trump administration’s of sources, resulting in the preparation of comprehensive
inclination toward statistics on bilateral trade activities. Given the urgency of
the situation, a quick estimate has been prepared based
imposing reciprocal on disaggregated data, offering a broad perspective
tariffs casts a shadow on bilateral trade dynamics and revealing key sectoral
of uncertainty over outcomes, as summarised in Table 4.7.

India’s access to the In 2023, bilateral trade in goods and services was
valued at $117 billion and $75 billion, respectively, leading
U.S. market. to a combined trade surplus of $52 billion. During this
period, exports of goods and services reached $122 billion,
while imports stood at $70 billion, indicating that U.S.
exports supported 57.4% of its bilateral imports from

47
 Trump’s Trade Policies Peril Global Economic Stability

India. Forecasts suggest that bilateral trade will flourish

in terms of volume and the relative trade imbalance,
with double-digit annual growth anticipated for both
Despite these positive goods and services, although trade in goods is projected
projections, a key to outpace growth in services. Within the services sector,
India’s exports are expected to register a slightly higher
downside risk of the
growth rate than its imports, resulting in a substantial
agreement lies in U.S. trade deficit in the sector by 2030.
the fact that India By that year, total exports in goods and services
will be required to are projected to touch $285 billion, while imports are
expected to reach $215 billion, resulting in a modestly
make significant
increased trade surplus of $70 billion. However, the
commitments in overall trade surplus in goods trade is projected to decline
importing goods and at a CAGR of -4.7%. In 2030, U.S. exports are expected to
cover 75.4% of its imports from India, with the deficit-
services to sustain to-trade ratio anticipated to decline significantly from
the momentum of the 27.1% in 2023 to 14%.
proposal, as stipulated Despite these positive projections, a key downside risk
in the agreement. of the agreement lies in the fact that India will be required
to make significant commitments in importing goods
and services to sustain the momentum of the proposal,
as stipulated in the agreement. This preliminary estimate
could be further refined using the latest available data,
enhancing the depth and precision of the bilateral trade
outlook.

48
 Trump’s Trade Policies Peril Global Economic Stability

5
The Way Forward

O
ver the past two decades, trade between identify and exploit complementarities that
India and the U.S. has expanded remain untapped. While both nations actively
significantly. However, given the participate in intermediate goods trade, their
vastness of both nations’ external sectors, the exchange remains relatively balanced, avoiding
growth of bilateral trade could have been a lopsided dependency. Notably, trade in semi-
far more substantial. There exists immense processed goods far exceeds that in parts and
potential for both countries to deepen their components, revealing a potential area for
trade ties without triggering concerns over trade deeper integration. In the final goods sector,
imbalances. Achieving this, however, would India enjoys an edge in exporting consumer
require more serious and strategic engagement. goods, while its reliance on the U.S. is more
Both nations possess complementary strengths pronounced in capital goods imports. Unlocking
across primary and non-primary sectors, the full trade potential in each other’s markets
creating opportunities for mutual benefit. requires a targeted and proactive approach.
Beyond these inherent complementarities, Meanwhile, in technology-intensive sectors,
there is also strong evidence of Intra-Industry India’s trade trajectory with the U.S. has been
Trade (IIT) between India and the US, wherein remarkable. However, within this framework,
both countries simultaneously engage in trade in primary and resource-based agro-
exporting and importing within the same products witnessed a decline in 2023 compared
industry. This dynamic not only diversifies to the previous year, raising concerns for both
the choices available to domestic consumers economies. Across the broader spectrum of
but also enhances their economic preferences. technology-intensive sectors, India’s imports
In the primary sector, the U.S. maintains from the U.S. surged significantly, whereas
comprehensive dominance; however, within its exports saw notable growth only in high-
this broad category, India holds a comparative tech goods. With the exception of the primary
advantage in agricultural trade, particularly in product segment where mineral fuels remain a
processed food exports. The U.S. commands a key area of import dependence, India registered
significant lead in mineral exports, notably in a trade surplus across most technology-
mineral fuels. Despite these distinct sectoral intensive categories, including resource-based
specialisations, the overall volume of bilateral agro-products. This suggests that India has
trade remains far below its true potential. achieved a strong position in multiple sectors,
with its vulnerabilities largely confined to
A sectoral analysis of Indo-US trade provides
primary commodities.
a nuanced perspective on the strengths and
opportunities available for enhancing bilateral India has actively pursued a policy of
trade relations. In the intermediate goods reconciliation with the U.S. to strengthen
sector, trade has yet to reach an optimal level, bilateral trade ties, favouring a cooperative
necessitating greater bilateral engagement to and sustainable approach to address trade

49
Trump’s Trade Policies Peril Global Economic Stability

imbalances. Should the U.S. choose to adopt a coercive

stance to correct these imbalances, India is well-equipped
with alternative strategies to counter any aggressive
measures. By fostering a pragmatic and forward-looking
trade policy, India can continue to navigate its economic
relationship with the U.S. while ensuring its own strategic
and commercial interests remain safeguarded.
India can leverage traditional retaliatory measures
to safeguard its trade interests. Collaborating with like-
minded nations to develop a comprehensive Action Plan
could provide a unified approach to counter unilateral
trade actions by the U.S. India may also consider filing
formal cases with the WTO against such measures,
escalating tariffs on U.S. imports, or diversifying its
import sources in critical sectors such as mineral fuels,
precision instruments, dye extracts, edible fruits, and nuts.
Although retaliatory and counter-retaliatory measures
may disrupt bilateral trade flows for both countries, they
are often necessary to restore the balance of power in
trade negotiations. By adopting such strategies, India can
facilitate meaningful resolutions to bilateral trade disputes
while safeguarding its long-term economic interests

50
 Trump’s Trade Policies Peril Global Economic Stability

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 Trump’s Trade Policies Peril Global Economic Stability

Appendix
Appendix I: Sectoral Trade Balance of the U.S. with Its Top Trade Surplus Partners,
($ Billion)
Sec VarCD CAN CHE CHN DEU IND IRL ITA JPN MEX MYS
Imports
1. Live Animals and Animal
1 9.6 0.1 1.5 0.4 2.2 0.6 0.7 0.5 3.9 0
Products
2 2. Vegetable Products 8.7 1.1 1.4 0.6 1.8 0 0.5 0.2 21.5 0
3. Animal or Vegetable Fats &
3 6 0 0.9 0.1 0.2 0 0.8 0.1 0.5 0.3
Oils
4. Prepared Foodstuff,
4 19.6 0.6 2.6 1.6 1.5 0.8 5.8 0.8 21 0.5
Beverages, etc.
5 5. Mineral Products 134 0 0.7 0.4 5.3 0.1 2.2 0.8 25.8 0.5
6 6. Products of Chemicals 25.4 20 21.2 29 17 61 12 14 7.2 0.7
7 7. Plastics & Articles thereof 16.7 0.4 22.9 4.9 2.1 0.4 1.4 5.3 12.7 1.9
8. Raw Hides & Skins, Leather,
8 0.1 0 3.3 0.1 0.7 0 2.2 0 0.4 0
etc.
9 9. Wood & Articles of Wood 11.5 0 2.4 1 0.3 0 0.2 0 0.8 0.3
10. Pulp of wood or of other
10 10.3 0.1 5.3 1.2 0.5 0 0.5 0.3 2.4 0.2
Fibers
11 11. Textile & Textile Articles 1.6 0.1 28.7 0.8 10 0 2.8 0.8 5.4 0.2
12. Footwear, Headgear and
12 0.1 0 13.8 0.4 0.5 0 2.4 0 1.2 0
Umbrella
13. Articles of Stone, Plaster,
13 1.8 0.1 5.9 1.5 1.6 0 1.8 1.1 4.4 0.2
Cement
14. Natural or cultured pearls,
14 11.5 8 1.7 2.2 12 0.1 2.7 0.5 5.5 0
Jewellery
15. Base Metals & Articles of
15 34.3 0.7 24.5 7.8 5.5 0.1 3.7 5.7 18.7 0.9
Base Metal
16. Machinery & Mechanical
16 41.7 5.2 213 47 19 3.4 18 56 167 33
Appliances
17. Vehicles, Aircraft and
17 65.2 0.8 17.9 38 3 0 8.3 53 133 0.4
Vessels
18. Optical, Photograph &
18 4.7 10 12.8 13 0.8 8.9 2.8 7.7 22.5 3.7
Cinematography
19 19. Arms and Ammunition 0.2 0 0.2 0.4 0 0 0.5 0.1 0.1 0
20. Miscellaneous
20 6.3 0.1 57.7 1.3 1.8 0 2.3 1 15.4 2.3
Manufactured Articles
21. Works of Art Collectors'
21 0.2 0.3 0.1 0.9 0 0 0.9 0.3 0.1 0
Pieces
Exports
1. Live Animals and Animal
1 3.9 0 4.9 0.1 0 0 0.1 4.1 7.2 0.1
Products
2 2. Vegetable Products 10.9 0 20.4 2.4 1.2 0 1.6 6.1 12.9 0.3
Continued...

52
 Trump’s Trade Policies Peril Global Economic Stability

Continued...

3. Animal or Vegetable Fats &

3 0.9 0 0.1 0 0 0 0 0 0.6 0
Oils
4. Prepared Foodstuff,
4 17.2 0.1 2.4 0.2 0.4 0.4 0.1 2 7.9 0.3
Beverages, etc.
5 5. Mineral Products 32.2 0.4 21.2 6 11 1.3 6.7 13 47 0.8
6 6. Products of Chemicals 30.5 4.9 21.6 13 4.6 5.4 6.3 14 23.4 1.2
7 7. Plastics & Articles thereof 19.7 0.2 7.9 2 1.8 0.6 0.7 2 25.5 1.1
8. Raw Hides & Skins, Leather,
8 0.7 0 0.7 0 0 0 0.2 0.1 0.5 0
etc.
9 9. Wood & Articles of Wood 2.5 0 1.5 0.1 0.1 0.1 0.1 0.8 1.1 0
10. Pulp of wood or of other
10 8.7 0.1 2.5 0.6 0.9 0.1 0.4 1 5.9 0.3
Fibers
11 11. Textile & Textile Articles 4.6 0.1 2.3 0.3 0.4 0.1 0.2 0.4 6 0.1
12. Footwear, Headgear and
12 0.7 0 0.1 0 0 0 0 0.1 0.2 0
Umbrella
13. Articles of Stone, Plaster,
13 3.7 0.1 0.9 1.4 0.2 0 0.2 0.7 1.9 0.1
Cement
14. Natural or cultured pearls,
14 8.5 14 2.1 2.2 5.5 0.1 3 2.1 0.8 0.4
Jewellery
15. Base Metals & Articles of
15 22.5 0.3 4.8 1.9 2.7 0.3 0.8 1.7 26.4 2.3
Base Metal
16. Machinery & Mechanical
16 82.1 1.3 25.3 14 4.9 3.6 4 11 97.2 8.4
Appliances
17. Vehicles, Aircraft and
17 59.7 0.2 8.2 11 0.9 0.1 1.1 3.2 30 0.2
Vessels
18. Optical, Photograph &
18 10.9 1.8 11.4 7.6 1.9 1.6 1.3 7.5 10.3 1.1
Cinematography
19 19. Arms and Ammunition 0.5 0 0 0.3 0 0 0.1 0.6 0.1 0
20. Miscellaneous
20 8.5 0 0.5 0.4 0.1 0 0.1 0.4 3.7 0.1
Manufactured Articles
21. Works of Art Collectors'
21 0.2 1.8 0.1 0.6 0.1 0 0.3 0.3 0.1 0
Pieces
Total Trade
1. Live Animals and Animal
1 13.5 0.1 6.4 0.5 2.2 0.6 0.8 4.6 11.1 0.1
Products
2 2. Vegetable Products 19.6 1.1 21.8 3 3 0 2.1 6.3 34.4 0.3
3. Animal or Vegetable Fats &
3 6.9 0 1 0.1 0.2 0 0.8 0.1 1.1 0.3
Oils
4. Prepared Foodstuff,
4 36.8 0.7 5 1.8 1.9 1.2 5.9 2.8 28.9 0.8
Beverages, etc.
5 5. Mineral Products 166 0.4 21.9 6.4 16 1.4 8.9 13 72.8 1.3
6 6. Products of Chemicals 55.9 25 42.8 42 21 67 19 28 30.6 1.9
7 7. Plastics & Articles thereof 36.4 0.6 30.8 6.9 3.9 1 2.1 7.3 38.2 3
8. Raw Hides & Skins, Leather,
8 0.8 0 4 0.1 0.7 0 2.4 0.1 0.9 0
etc.

53
 Trump’s Trade Policies Peril Global Economic Stability

9 9. Wood & Articles of Wood 14 0 3.9 1.1 0.4 0.1 0.3 0.8 1.9 0.3
10. Pulp of wood or of other
10 19 0.2 7.8 1.8 1.4 0.1 0.9 1.3 8.3 0.5
Fibers
11 11. Textile & Textile Articles 6.2 0.2 31 1.1 10 0.1 3 1.2 11.4 0.3
12. Footwear, Headgear and
12 0.8 0 13.9 0.4 0.5 0 2.4 0.1 1.4 0
Umbrella
13. Articles of Stone, Plaster,
13 5.5 0.2 6.8 2.9 1.8 0 2 1.8 6.3 0.3
Cement
14. Natural or cultured pearls,
14 20 22 3.8 4.4 18 0.2 5.7 2.6 6.3 0.4
Jewellery
15. Base Metals & Articles of
15 56.8 1 29.3 9.7 8.2 0.4 4.5 7.4 45.1 3.2
Base Metal
16. Machinery & Mechanical
16 124 6.5 238 61 24 7 22 66 264 42
Appliances
17. Vehicles, Aircraft and
17 125 1 26.1 49 3.9 0.1 9.4 56 163 0.6
Vessels
18. Optical, Photograph &
18 15.6 12 24.2 21 2.7 11 4.1 15 32.8 4.8
Cinematography
19 19. Arms and Ammunition 0.7 0 0.2 0.7 0 0 0.6 0.7 0.2 0
20. Miscellaneous
20 14.8 0.1 58.2 1.7 1.9 0 2.4 1.4 19.1 2.4
Manufactured Articles
21. Works of Art Collectors'
21 0.4 2.1 0.2 1.5 0.1 0 1.2 0.6 0.2 0
Pieces

54
 Trump’s Trade Policies Peril Global Economic Stability

Appendix II: India’s Sectoral Trade with the US in 2023, $Bn

HS Section Imports Exports Trade Balance
1. Live Animals and Animal Products 0 2.1 2.1
2. Vegetable Products 1.1 1.6 0.5
3. Animal or Vegetable Fats & Oils 0.0 0.2 0.2
4. Prepared Foodstuff, Beverages, etc. 0.3 1.3 1.0
5. Mineral Products 13.5 6.7 -6.8
6. Products of Chemicals 5.6 12.5 6.9
7. Plastics & Articles thereof 2.4 2.2 -0.2
8. Raw Hides & Skins, Leather, etc. 0.0 0.7 0.7
9. Wood & Articles of Wood 0.1 0.2 0.1
10. Pulp of wood or of other Fibers 1.0 0.5 -0.5
11. Textile & Textile Articles 0.5 9.3 8.8
12. Footwear, Headgear and Umbrella 0.0 0.4 0.4
13. Articles of Stone, Plaster, Cement 0.2 1.4 1.2
14. Natural or cultured pearls, Jewellery 1.9 10.2 8.3
15. Base Metals & Articles of Base Metal 3.3 5.1 1.8
16. Machinery & Mechanical Appliances 7.2 15.9 8.7
17. Vehicles, Aircraft and Vessels 2.3 3.2 0.9
18. Optical, Photograph & Cinematography 2.3 1.0 -1.3
19. Arms and Ammunition 0.0 0.0 0.0
20. Miscellaneous Manufactured Articles 0.2 1.4 1.2
21. Works of Art Collectors' Pieces 0.2 0.0 -0.2
Total 42.1 75.9 33.8
Source: Estimated by RIS based on Comtrade, United Nations, Online.

55
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