Trump’s Tariff War: India Among The Biggest Potential Victims

Economists from major global banks, including Morgan Stanley and Nomura Holdings Inc., have highlighted India and Thailand as two of the most vulnerable nations to President Donald Trump's pledge to implement reciprocal tariffs on trade partners.

These countries are particularly exposed because the tariffs they impose on the US are generally much higher than those imposed by the US on them, according to various estimates from analysts who evaluated scenarios involving equal tariff rates. However, it's important to note that Trump has yet to clarify the specifics of the policy, including which countries would be affected and the criteria for selection.

"Emerging Asian economies have higher relative tariff rates on US exports and are thus at risk of higher reciprocal tariffs," said Sonal Varma, the Managing Director and Chief Economist of Nomura Holdings, in a note to clients. "We expect Asian economies to step up their negotiations with Trump."

Maeva Cousin from Bloomberg Economics and George Saravelos from Deutsche Bank are among those who concluded that India's significant tariff disparity with the US makes it especially vulnerable to retaliatory measures. According to Cousin's analysis, the average tariff India imposes on US imports is more than 10 percentage points higher than the tariffs the US applies to Indian goods.

The risk for India, in particular, is substantial. As one of the world's fastest-growing economies and a key player in global trade, India's exports to the US are a vital component of its economic success. However, any significant increase in US tariffs on Indian goods could dampen trade volumes, impacting sectors ranging from technology to agriculture.

With India's trade deficit with the US already under scrutiny, higher tariffs could exacerbate the financial strain on Indian exporters, potentially leading to a ripple effect throughout its economy.

As the global economy faces the threat of a new round of protectionist policies, the impact of Trump's eye-for-eye tariff threat could be far-reaching. India and Thailand, along with other vulnerable nations, must brace for potential economic consequences while watching closely to see whether diplomatic negotiations or retaliatory actions will shape the future of international trade.

Economists are now focused on Modi's highly anticipated visit to the US on February 12-13, 2025.