The “America First” trade policy promoted by upcoming US President Donald Trump has far-reaching implications for global trade and geopolitics.
According to a report by Motilal Oswal, this policy carries mixed outcomes for exporters worldwide because it is designed to prioritize US manufacturing by reducing imports, particularly from China.
Trump’s policies present opportunities and challenges for India. The Indo-Pacific defense strategy could strengthen US-India collaboration, opening doors for Indian businesses in sectors such as pharmaceuticals and defense.
It said, “Indian businesses in sectors such as pharmaceuticals and defence might also find new opportunities, especially if US- India collaboration strengthens… Emerging markets face a mixed bag of challenges and opportunities.”
Additionally, anticipated US corporate tax cuts could boost IT spending, benefiting India’s IT sector. However, a stronger dollar and potential tariffs on Indian exports could strain its trade balance. Another significant concern is the impact of increased tariffs on US exports. Key industries like agriculture and technology risk losing competitiveness in global markets if trading partners impose retaliatory tariffs.
The report said, “Increased tariffs might prompt retaliatory measures from trade partners, potentially affecting US exporters in sectors like agriculture and technology.” The report also highlighted that India may find a silver lining in global supply chain realignments, particularly in technology areas like AI and semiconductors, driven by the “China+1” strategy.
For instance, the European Union (EU) may levy duties on American goods, potentially hampering the automotive and steel industries. These measures could slow growth in Europe and disrupt global trade patterns. Emerging markets face a dual challenge. While higher tariffs and a stronger dollar may escalate export costs for sectors like IT and pharmaceuticals, some countries, like Mexico, stand to gain by attracting manufacturing that might otherwise remain in China.
The report highlighted that geopolitically, Trump’s approach will likely escalate tensions with China and reshape alliances. Countries like Japan and South Korea may reconsider their strategies, while the EU might strive for self-reliance, fostering new alliances outside US influence.
