Navigating trade challenges

IN 2025, INDIA'S TRADE POLICY SHOULD FOCUS ON SERVICES, US AND JOINING THE CPTPP

- AMITENDU PALIT

INDIAN TRADE POLICY needs to prepare for navigating complex challenges in 2025. The challenges will arise from a combination of factors. These include President Trump's assumption of office as the US President; a stagnation in global economic growth and consequent lower demand for manufacturing exports; possibilities of far-reaching political changes impacting trade with major partners; and a lower rate of domestic economic growth.

President Trump's decisions on tariffs will impact prices of various exports to the US. For India too, the tariffs will be meaningful given that the US is its largest export market. If Trump tariffs are levied on several of the US' major trading partners, then an interesting scenario will emerge where these partners will explore ways of circumventing tariffs for accessing the US market. The likely outcome, as already demonstrated by China, will be to relocate production to locations from which exporting to the US won't attract tariffs. India might need to explore similar options too.

Tariffs will impact export competitiveness with US consumers finding the products becoming more expensive. The erosion of market access in the US will be compounded by slower economic growth in many parts of the world and its effect on demand for Indian exports. Some indications in this regard are already visible through lower growth of traditional "hot" Indian exports like gems and jewellery, and petroleum products. More political turbulence, including changes in governments in India's key export markets in Europe and West Asia, can further affect the prospects of exports. A projected lower level of domestic economic growth will impact capacity utilisation of manufacturing exports, which, as it is, will be impacted by the other mentioned changes.