Despite Revoking GSP Status In Trump 1.0, India-US Trade Surged, Trump 2.0 Could Continue The Trend: SBI

Despite losing Generalized System of Preferences (GSP) status under the Trump administration's first term, India's trade with the United States demonstrated notable resilience and growth, highlighted a report by State Bank of India.

Banking On Trump 2.0

The report noted that while the GSP status has yet to be restored, India has seen rising exports in several key sectors where it has gained a comparative advantage over major competitors like China.

It noted that footwear, minerals, chemicals, and machinery have all shown growth, reflecting India's deepening integration into global value chains and the country's ability to capitalize on shifting trade dynamics.

The China Factor

The report said "India's GSP status has still not been restored, a commodity wise breakup reveals rise in India's export of certain commodities in which it has gained comparative advantage over China".

The report highlighted that from 2017 to 2021, a detailed commodity analysis revealed that India has developed a Revealed Comparative Advantage (RCA) in exports of metals, minerals, chemicals, footwear, textiles, and intermediate clothing goods, with RCA values consistently above 1 in these sectors.

This indicates a competitive edge, particularly as India positions itself as a favorable alternative to China in these industries.

The report also added that the ongoing supply chain relocations and potential for a second Trump administration, or "Trump 2.0," may further enhance India's role in sectors such as pharmaceuticals, electronics, and textiles, which are likely to see gains as companies and countries reassess their dependencies.

India's Surplus Trade With The US

"Further, given the global supply chain relocation and Trump 2.0 sectors such as Pharmaceuticals, Textiles, Electronics are likely to gain" the report added.

A closer look at India's iron and steel exports to the U.S. further highlighted this trend. In 2018, the U.S. imposed tariffs of 25 per cent on steel, 10 per cent on aluminum, and approximately 30 per cent on washing machines. Nevertheless, Indian iron and steel exports to the U.S. surged by 44.7 per cent from FY20 to FY21.

India has maintained a trade surplus with the U.S., demonstrating the robustness of its export sector even amid restrictive tariffs.

India's expanding foothold in the U.S. market and its comparative advantage in specific sectors position it well to continue reaping economic benefits, as global supply chains evolve and trade policies shift.

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