When Donald Trump took to the podium on January 20, 2025, for his inaugural address, he vowed to “immediately begin the overhaul of our trade system to protect American workers and families”, and soon enough, without any delay, he began what he set out to do. In February, he announced his plan for ‘reciprocal tariffs’. In March, he imposed heavy tariffs on goods from Mexico and Canada. And now, in April, his latest policy involves a 25 per cent tariff on imports of automobiles with additional tariffs on car components to be announced by May 3.

The automobile tariffs will come into effect from April 3, 2025, and is expected to hit all cars, trucks, and automobile components being imported into the US. The increased tariffs were received unfavourably from both governments and industry. French President Emmanuel Macron called them “a waste of time”, while Chinese Foreign Minister Wang Yi said the tariffs “will cause serious damage not only to the global market and trade order, but also to the reputation of the [United] States themselves.” Meanwhile, the shares of automobile companies have fallen, General Motors, Ford, Toyota, Nissan, and Hyundai all experienced an average share price decline of 7.8 per cent.

While Trump’s new policy may adversely affect the global economy, India might feel little reverberations from it, primarily because the United States is not a significant market for Indian vehicles. In 2024, out of the total Indian car exports of $ 6.98 billion, only $ 8.9 million worth of cars was exported to the US – less than 0.13 per cent. By contrast, a majority of Indian cars are exported to countries in the Middle East and Latin America, such as Saudi Arabia, UAE, Chile, and so on.

However, while fully assembled vehicles may not need to worry, vehicle components such as engines, powertrains, and transmissions may feel the brunt of the new duties. Of India’s total component exports, 30 per cent are imported by the US, in numbers, that’s $ 2.2 billion worth of auto parts. While this might seem to cause concern, it’s worth noting that the tariff rate affects all other countries as well, and is mainly targeted at reducing trade from China, Canada and Mexico. As the Global Trade Research Initiative noted, “India's auto component industry may even find an opening. With its competitive advantage in labour-intensive manufacturing, India could increase its market share in the US over time.""

Ultimately, it remains to be seen the worldwide effect that Trump’s tariff policies will have on global trade networks. While India may not be as negatively affected as compared to other countries, it should take advantage of every opportunity it can and establish itself as a worthy trade partner of the US.