Think tank calls for trade preparedness as Trump 2.0 looms

India must proactively set up a task force that will identify and fix potential gaps that may arise from trade, investment, technology and finance linkages to the US as the incoming Donald Trump administration, with its America First policy priority, may pose hurdles to smooth bilateral cooperation, a think tank said.

The world will get to know the direction the new administration will take, based on executive action on the first day of Trump’s presidency, but “going forward, managing trade disruption cannot be conjured up overnight. So, India may need to plan first, plan hard, and yet plan fast,” Research and Information Systems for Developing Countries (RIS) said in a report.

“We need to deepen trade linkages at sectoral and product level by identifying issues related to threats and opportunities before devising policy actions,” the report, titled “Trade, Tariff and Trump,” released on Tuesday said.

The US may target end-use items such as consumer goods for tariffs, making India’s key exports—pharmaceuticals, gems and jewellery, and shrimp—vulnerable due to their prominence in trade, the report said.

India must streamline active pharmaceutical ingredient (API) supply chains to meet US Food and Drug Administration (USFDA) standards and explore new markets to mitigate risks. For jewellery, it must focus on value addition to appeal to American consumers. For shrimp, sanitary and phytosanitary measures need to be strengthened, the report said.

“There are others…that may also need proactive advance action, like leather goods, textiles, plasticware and base metal articles,” for which “we may have both threats and opportunities, as we compete with several other countries for the US market, it added.

China, Mexico, and Canada, with a 40% trade surplus, face higher tariff risks from the US than India, which ranks ninth with a $34 billion trade surplus and gives New Delhi “an opportunity to fill the space vacated by them,” it added.

“During Trump 1.0, India could not leverage such action fully as China used Mexico as a manufacturing base for exporting to the US the items targeted by tariffs, thus continuing its dominance, the report said, while cautioning that this time, “it will need to be done fast so that the reactive actions by these countries do not displace us soon.”

India, meanwhile, has established a strong foothold in the US services sector but remains overly reliant on H-1B visas for service delivery, the report noted.

However, as business models evolve, traditional business process outsourcing (BPO) services from India may no longer benefit significantly from time-zone advantages, it said, while pointing out that to remain competitive, “India should shift focus toward high-value areas like professional services and maintenance, repair, and overhaul (MRO) sectors, which offer sustainable growth opportunities.”

India has established a presence in all segments of the US technology-driven product market. While US tariffs on high-tech products are low (0.2%), they may face hikes under the new administration, the report said, adding that strengthening ties with US importers can help lobby against such measures.

Meanwhile, low-tech products, with higher tariffs, offer opportunities to improve participation in US manufacturing value chains. Additionally, India should swiftly review its bilateral investment treaty model to support sustainable trade and investment initiatives, it added.