U.S. President-elect Donald Trump’s "America First" trade policy is set to have profound implications for global trade and geopolitics, with mixed outcomes for exporters worldwide, according to a new report by Motilal Oswal.
The policy, which prioritises U.S. manufacturing by reducing imports, particularly from China, is expected to benefit some countries while posing challenges for others.
For India, the policy presents both opportunities and risks. The report highlights that Trump's Indo-Pacific defence strategy could strengthen U.S.-India collaboration, potentially opening doors for Indian businesses in sectors such as pharmaceuticals and defence.
"Indian businesses in sectors such as pharmaceuticals and defence might find new opportunities, especially if U.S.-India collaboration strengthens," the report states.
Additionally, anticipated U.S. corporate tax cuts could boost IT spending, providing a potential boost to India’s IT sector.
However, the policy’s implications for India are not entirely positive. A stronger dollar and the potential imposition of tariffs on Indian exports could strain India’s trade balance.
The report notes, “Increased tariffs might prompt retaliatory measures from trade partners, potentially affecting U.S. exporters in sectors like agriculture and technology.” This could result in India facing higher export costs in key sectors like IT and pharmaceuticals.
The report also warns that U.S. exporters, especially in agriculture and technology, could lose their competitiveness in global markets due to the imposition of tariffs by trading partners. This could have a knock-on effect on U.S. industries, with retaliatory tariffs possibly levied by countries like the European Union.
The EU, in particular, may impose duties on American goods, which could adversely affect U.S. industries such as automotive and steel, while also disrupting global trade patterns.
Despite these challenges, India may find a silver lining in global supply chain realignments. The "China+1" strategy, which encourages companies to diversify their supply chains away from China, could provide new opportunities for Indian businesses, particularly in technology sectors like artificial intelligence (AI) and semiconductors.
Geopolitically, Trump’s approach is expected to escalate tensions with China, potentially reshaping global alliances. Countries like Japan and South Korea may reassess their strategies in response, while the EU may seek greater self-reliance, leading to the formation of new alliances outside U.S. influence.
Emerging markets, while facing dual challenges of higher tariffs and a stronger dollar, may also see opportunities. For example, Mexico could benefit by attracting manufacturing that might otherwise have stayed in China.
Countries like Japan and South Korea may reassess their strategies, while the EU might pursue self-reliance and foster new alliances beyond U.S. influence.
As the Motilal Oswal report concludes, “Emerging markets face a mixed bag of challenges and opportunities” under the new policy direction.
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