Trump's Tariffs on Mexico, Canada, China: Will India Benefit From This?

US President Donald Trump has started a trade war against Mexico, Canada and China to start with, and global markets are feeling the jitters from this tariffs conflict. This will not only have an impact on markets but will dent global growth and induce higher inflation across the world.

Asian markets felt the pressure from the tariff announcements with most indices opening in red and while the Indian stock market nosedived in the opening bell of Monday, February 3, 2025, Sensex also plunged nearly 732 points and erased the 77,000 mark. Nifty 50 also faced the wrath of bears with a decline of 243 points to fall below 23,250 levels.

To set the context right, Mexico and Canada are United States' biggest trading partner and they have already announced a retaliation after Trump imposed tariff of 25%. A 10% tariff is also imposed on China.

An economic conflict between China and the United States started since January 2018, when then President Trump began setting tariffs and other trade barriers on China with the motive of forcing it to make changes to what he said to be long-standing unfair trade practices and intellectual property theft.

While trade war with the US could push Mexico and Canada into a recession, chances are it will have a cascading impact on other economies as more or less every country in the world is dependent on each other for trade.

Canada and Mexico have said they were working together to fight Trump's tariffs.

In all this, where is India placed? Well, there are pros and cons..

Due to dollar strength, Indian rupee has touched historic low on Monday at 87.17 against the US dollar.

Will India Benefit from the Trade War?

There is no yes or no answer to this question.

Firstly, the stock market work on sentiments and currently market sentiment is bearish. That is despite common man getting a much awaited relief in the Union Budget 2025 where income groups up to 12 lakhs per annum will pay no tax. Despite that, the market crashed today driven by global fear. That may continue if things go south.

Secondly, China and Mexico's pain can be India's gain. India may leverage the opportunities of tariffs on these two countries and start exporting as alternate source. But this is not a black and white situation. How it actually plays out is difficult to predict. If there is a full blown trade war, then the global economy will take a hit. Trade will slow, economic growth will slow, consumer price inflation will shoot up and in the end even India will get impacted.

For now, India is not in the Trump's tariff's list. News Delhi and Washington are not on worst terms.

One more impact will be on foreign funds. As it is foreign investors have already sold record high funds from the Indian equity market following Trumps election. If the conflict escalates to a full blown trade war like it had in 2018, we can see further selling in the stock market.

For now, India has an upper hand and a fair chance of leveraging its position in the global market. But investors remain cautious and the stock market remains shaky. It is in a wait and watch more.