Trump 2.0: India poised to leverage comparative advantage amid shifting global trade and supply chains

With Donald J. Trump’s historic return to the White House as the 47th US President, the new administration’s likely focus on domestic job creation, shoring up US manufacturing, and strengthening supply chains are expected to present opportunities for India’s trade landscape. India stands to benefit, particularly in sectors like pharmaceuticals, textiles, and electronics, which are positioned to capture value as companies look to diversify away from China, a State Bank of India (SBI) report said.

In the previous Trump administration, India saw the revocation of its Generalised System of Preferences (GSP) status which had enabled tariff-free exports on specific goods to the US. While the GSP status has not been reinstated, Indian exports in key sectors have continued to grow, underlining India’s resilience and adaptive approach. Footwear, minerals, and machinery exports to the US are on an upward trend, with footwear alone rising by 8 percent in FY23 compared to the previous period (FY22). Similarly, mineral exports increased by 33 percent from FY22 to FY23, highlighting India’s competitive edge in these sectors.

Strategic partnerships between the two nations, such as the Indo-US 2+2 Dialogue, set a strong foundation during Trump’s first term. The return of Trump could further solidify these relationships, particularly with the Indo-Pacific region’s strategic importance. Indian defence exports, bolstered by increasing international demand and favourable government policies, have surged 30 times over the past decade — a trend expected to continue under Trump’s assertive geopolitical stance, the report stated.

Financial markets are poised for short-term volatility amid potential tariff hikes, visa restrictions, and a strong dollar. However, a weaker rupee could prove advantageous for Indian exports, especially in manufacturing, textiles, and agriculture. “India’s comparative advantage in sectors like footwear and electrical machinery is already showing results, with exports climbing despite global trade turbulence,” the SBI’s report noted.