US President Donald Trump has announced new tariffs on Mexico, Canada, and China, while notably excluding India from the latest round of trade actions. The new tariffs, which go into effect on February 1, target the countries that contribute most to the US trade deficit. Mexico and Canada will face a 25% tariff, while China will be subject to a 10% tariff.
The decision comes as Trump seeks to address what he perceives as the US’s growing trade imbalances with certain countries. During a press briefing, Trump highlighted the significant deficits with China, Mexico, and Canada, which are the top three contributors to the US trade deficit. According to Trump, China alone accounts for 30.2% of the deficit, Mexico contributes 19%, and Canada adds 14%.In contrast, the US left India out of the tariff measures, despite India making up just 3.2% of the US trade deficit.
Trump’s remarks focused on the broader trade dynamics with these countries. He accused China of sending massive amounts of fentanyl into the US, which he claims is responsible for hundreds of thousands of deaths. He also expressed concerns about the role of Mexico and Canada in facilitating the flow of fentanyl into the country. Trump cited a $200 billion trade deficit with Canada and a $250 billion deficit with Mexico as reasons for his decision to target them with new tariffs.
India, however, did not feature in Trump’s tariffs despite contributing to the US trade deficit. According to a report by the Research and Information System (RIS), India ranks as the ninth-largest contributor to the deficit, far behind China, Mexico, and Canada. This could explain why India was spared from the latest measures.
The US’s relationship with India has been shaped by evolving trade policies. According to India’s Economic Survey, the country has progressively adapted its import tariff policy to balance domestic needs with global economic integration. The Indian government has worked to protect sensitive sectors while ensuring compliance with World Trade Organization (WTO) rules. The Economic Survey also emphasized India’s efforts to rationalize tariffs and address inverted duty structures.
While the US excluded India from these new tariffs, other global dynamics continue to play out. A recent report from the Peterson Institute for International Economics warned that the US’s 10% tariff on China, coupled with retaliatory actions from China, could lead to a $55 billion reduction in US GDP over the next four years. The same report predicted a $128 billion loss for China, with a temporary dip in inflation in China followed by a rise of 30 basis points.
Looking ahead, NITI Aayog CEO BVR Subrahmanyam has suggested that trade policies under the Trump administration could create opportunities for India, particularly through global trade diversions. This shift could open doors for India to benefit from new trade routes and economic opportunities as other countries adjust their policies in response to the US’s tariff actions.
In conclusion, while Trump’s new tariffs target key US trade partners like China, Mexico, and Canada, India remains unaffected for now, and its trade relationship with the US continues to evolve within a complex global economic landscape.
