Amidst Donald Trump's unconventional thinking, India will face the brunt of higher tariffs and immigration restrictions, but despite these challenges, the country will be the beneficiary if higher tariffs are imposed on China, according to a report by Philip Capital. Trump's return as US President is likely to bring substantial changes, particularly in international trade, tariffs, and immigration policies.
A global shift in trade policies will hurt India but the ‘China plus one’ (China+1) approach could lead to substantial benefits for India, assuming timely actions by the Indian government and corporate sector to fill the void left by China in various sectors. The report suggests that these headwinds may ultimately position India positively in the medium to long term. Trump, has shown an aggressive stance on imposing tariffs, particularly on Chinese imports, which could disrupt trade relations but will present opportunities for India as a bigger trade partner.
The report however noted that Trump's tough immigration policies could affect Indian IT firms, but with strategic local hiring and near-shore centers, Indian companies may adapt. The short-term demand for EV components from India could dip under Trump's administration, but hybrid vehicles might gain traction. Increased infrastructure spending could benefit companies involved in manufacturing truck components.
A Trump presidency would likely favour fossil fuels, which could lead to higher oil and gas production in the U.S. This would be beneficial for Indian oil refiners and gas utilities as energy prices will stabilise. Trump's tough stance on China could accelerate US-India defence cooperation. Increased infrastructure spending and fossil fuel investment in the U.S. would boost demand for metals, benefitting Indian companies involved in mining and metals. But Trump's aim to lower healthcare costs will increase competition in the pharmaceutical sector. This could pressure Indian generic drug makers, although export volumes to the U.S. are expected to remain stable.
The report advises investors to remain optimistic about India's economic and equity performance, despite recent volatility in the Nifty index, which has declined by 8 per cent due to foreign investor outflows and growth concerns. Phillip Capital remains "structurally positive" on India, suggesting that these dips represent buying opportunities in sectors like industrials, banking, and technology.
As India navigates global shifts in trade, the government's ability to leverage the China+1 strategy could be crucial. The rising tariffs on Chinese goods present a unique opportunity for Indian exports, particularly in areas like textiles, auto components, and consumer electronics, as more companies look to diversify away from China. (ANI)
