The previous Donald Trump administration’s tariff war with China created new winners in US markets with countries like India, Mexico, Vietnam, Canada, South Korea and Germany expanding their exports and expected boost to local manufacturing not materialising, according to an analysis by Global Trade Research Initiative (GTRI).
WIth the coming back of Donald Trump, a new tariff war is expected which might further realign world trade and offer more opportunities for India and other similarly placed countries, the trade policy think tank said in its report.
The last time Donald Trump was US president the trade war was initiated in 2018 by tariffs on key commodities like steel and aluminium. Later its scope was expanded and this led to $ 81.56 billion decline in China’s exports to the US between 2017 and 2023. Despite this the overall US trade deficit widened as imports shifted to non-Chinese sources, bypassing tariffs through free trade agreements.
Key beneficiaries of the trade war included Mexico, Canada, and Association of Southeast Asian Nations (ASEAN), which collectively accounted for 57% of the growth in US imports.
India also emerged as a significant gainer, with exports to the U.S. rising by $36.8 billion, driven by sectors like electronics, pharmaceuticals, and engineering goods.
The trade war created new export opportunities for several countries, with Mexico emerging as the biggest winner. Mexico’s exports to the U.S. increased by $164.3 billion between 2017 and 2023. Canada followed with $124.0 billion, and Vietnam came third with $70.5 billion. South Korea ($46.3 billion) and Germany ($43.0 billion) completed the top five.
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“India ranked sixth, with a $36.8 billion increase in exports, driven by growth in electronics, pharmaceuticals, and engineering goods. Other significant gainers included Ireland ($33.6 billion), Thailand ($26.5 billion), Italy ($23.8 billion), and Singapore ($21.1 billion),” GTRI founder Ajay Srivastava said.
Much of this growth for Mexico was driven by the US Mexico-Canada Agreement (USMCA), which enabled tariff-free trade, and Vietnam’s gain came from the Free Trade Agreement with the US.
Trump’s proposed 25% tariffs on Canada and Mexico could undermine the USMCA, while proposed higher tariffs on products made by Chinese firms in ASEAN countries signal continued trade tensions, he said.
“One of the reasons for the increase in exports from Mexico and ASEAN is growing Chinese investments in the manufacturing sector in these regions. In Mexico, the focus is on sectors like automotive, electronics, and heavy machinery. In ASEAN countries such as Vietnam, Thailand, and Indonesia, Chinese investments target electronics, textiles, and automotive sectors,” GTRI report said.
Between 2017 and 2023, China’s exports to the US declined, and its exports to other countries surged. China’s global exports surged by $1.1 trillion, growing from $2.3 trillion to $3.4 trillion during 2017 and 2023, offsetting its losses in the US market.
For dealing with new challenges and opportunities India post January 20 when Trump takes over as President, India should lower duties by modest adjustments and bring them down to 10% this will help in greater integration with global supply chains. A further boost to Make in India is crucial by focusing on value added exports in sectors like electronics, engineering goods, pharmaceuticals, and labor-intensive products.
Strengthening local supply chains and producing critical intermediates can reduce reliance on China, while improving cost efficiency and ease of doing business will enhance competitiveness. While creating new capacities and capability, India must also derisk its services exports as the IT sector relies on the U.S. for 80% of its export revenue, GTRI added.