The Impact of Trump’s Trade Policies on India’s Growth: Challenges and the Way Forward

The Impact of Trump’s Trade Policies on India’s Growth: Challenges and the Way Forward

By Aryan Dev | July 17, 2025

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With Donald Trump securing a strong position in the 2024 U.S. presidential race and signaling a return to his trademark "America First" trade doctrine, concerns are mounting globally, particularly in emerging economies like India. His past policies and current rhetoric suggest a protectionist wave that could potentially reshape the global trade landscape once again. For India, a country heavily reliant on global trade and tech exports, Trump's policies pose both challenges and opportunities.

A Throwback to 2016-2020 Policies

During Trump’s first term, the U.S. withdrew from multilateral trade agreements, imposed tariffs on steel and aluminum from countries including India, and tightened immigration norms under the H1-B visa regime. Indian IT and pharmaceutical sectors were significantly impacted. History may repeat itself, with Trump likely to reintroduce high tariffs and stricter visa policies, particularly targeting countries with trade surpluses with the U.S., including India.

Additionally, Trump’s aggressive stance towards China could open doors for India as an alternative manufacturing hub. However, this opportunity comes with the risk of being caught in geopolitical crossfire, particularly if U.S.-China tensions escalate further.

Current Implications on Indian Sectors

IT and Services: A tougher visa regime may hurt Indian IT giants that rely heavily on U.S. clients and workforce mobility.

Exports: Sectors like textiles, gems & jewelry, and automotive parts might face tariffs, making Indian products less competitive.

FDI Inflows: Unpredictable U.S. policy may deter American investors from investing in Indian markets, creating capital uncertainty.

Pharmaceuticals: Trump’s focus on lowering drug prices could pressure Indian generics manufacturers, a major export segment.

The Way Ahead for India

India must diversify its export base and reduce overdependence on the U.S. for trade and services. Strengthening regional trade agreements like RCEP (if reconsidered) or BIMSTEC, and forging stronger ties with the EU and ASEAN nations, could be strategic counterbalances.

Domestically, India should fast-track reforms in labor laws, land acquisition, and ease of doing business to attract companies looking for alternatives to China. The Production Linked Incentive (PLI) schemes should be aggressively expanded to cover emerging sectors like semiconductors, green energy, and AI-driven manufacturing.

India should also enhance bilateral trade relations with Middle Eastern and African nations, where U.S. influence is limited and competition is less intense. Leveraging soft power, diaspora networks, and digital diplomacy can further solidify India’s global trade presence.

Conclusion

Donald Trump’s potential return to protectionist trade policies poses short-term risks to India's economic growth, especially in export-led and service sectors. However, with the right strategic pivot—diversification of trade partners, strengthening domestic industries, and proactive diplomatic engagement—India can mitigate these challenges and even turn them into opportunities. A cautious but confident policy approach will ensure that India maintains its growth momentum, regardless of shifting global trade winds.