New Delhi [India], November 19 : US President-elect Donald Trump is poised to make import tariffs the cornerstone of his economic and geopolitical agenda, potentially triggering another round of global supply chain restructuring, according to S&P Global Market Intelligence.
Analysts suggest that the policy, continuing a trajectory set during Trump's first term, could create significant uncertainty for global trade and supply chain planning.
During his first term, Trump frequently cited merchandise trade deficits as a rationale for trade actions. While the U.S. trade deficit with mainland China has declined by 18.7 per cent since 2021, reaching USD 287 billion in the 12 months ending September 30, 2024, it remains the largest trade imbalance with any country.
Countries with rising trade deficits, including those with existing free trade agreements (FTAs) such as Mexico and South Korea, may face renewed tariff scrutiny. Notably, Vietnam has emerged as a key focus, with the US trade deficit with the country surging 30.6 per cent over the same period.
A deeper analysis reveals a second layer of risk targeting countries that benefit from reshoring trade trends linked to China. For example, mainland China's trade surplus with Vietnam grew by 25.1 per cent between 2021 and September 2024, translating to an USD 11 billion increase.
Simultaneously, the U.S. trade deficit with Vietnam expanded by USD 28 billion. This pattern of trade imbalances could draw attention to other Asian countries like Thailand, Laos, and Cambodia, which may face tariff risks similar to Vietnam and South Korea.
Another report by global brokerage firm CLSA says that amid this shifting trade landscape, India may emerge as one of the least affected markets in the region. India's limited trade exposure to the US, manageable corporate leverage, and declining foreign equity ownership position it as a relatively stable market.
"India appears among the least exposed of regional markets to Trump's adverse trade policies," the report stated. It also highlighted India's ability to maintain foreign exchange (FX) stability, provided global energy prices remain steady.
Despite the strengthening of the US dollar, India's economic resilience and domestic investor confidence have helped offset the impact of foreign investor outflows.
India's attractiveness as an investment destination has been bolstered by global shifts in supply chain strategies. The "China plus one" approach, aimed at diversifying supply chains away from China, presents significant opportunities for India.
India's stable macroeconomic fundamentals and its role in reshaping global supply chains make it a promising destination for future investment flows.
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