Donald Trump's tariff impact on trade: India may benefit from lower US duties; Moody's sees manufacturing boost amid APAC disruption
The ratings agency, in its outlook on APAC sovereigns, noted that several export-heavy economies across the region were hit by steep US tariff hikes in April 2025. Countries like Vietnam and Cambodia—previous beneficiaries of a supply chain pivot out of China—now risk losing their cost advantage amid rising trade frictions, PTI reported.
'In contrast to countries like Cambodia and Vietnam, India has the potential to emerge as a beneficiary of a tariff-driven shift in investment and trade flows.
India may be subject to lower tariffs than many in APAC,' Moody's said, pointing to a potential upside for the Indian economy.
The agency noted that India's recent free trade agreement (FTA) with the UK and ongoing negotiations with the EU could further support its push to become a preferred alternative to China in global supply chains. However, it cautioned that Washington's push to reshore select industries could limit the scope of gains India can capture.
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India is currently negotiating a mini trade deal with the US, as a 90-day suspension of a 26% reciprocal tariff on Indian goods expires on July 9. While the US has retained its 10% baseline tariff, India is pressing for complete exemption from the additional duties.
The talks are at a critical stage, with New Delhi seeking more access for its labour-intensive exports, and the US pushing for concessions on farm produce.
Officials from both sides are aiming to close negotiations before the tariff suspension deadline.
Moody's warned that persistent trade policy ambiguity is hurting investment decisions and weighing on long-term economic planning across the region. 'Uncertainty about trade policy and a potential overhaul of global trade have raised cyclical and possibly structural credit risks in APAC,' the ratings firm said.
It added that even as tariff-linked supply chain shifts could benefit India in the long run, realignment of global sourcing strategies will be gradual at best. 'It is unlikely that multinational companies will make drastic investment changes while there is still significant uncertainty about the magnitude of tariffs and whether they will persist,' Moody's noted.
'Instead, companies will likely slow or pause ongoing investments while they wait for a steady state on trade policies to emerge. Even then, any decision to relocate manufacturing or product sourcing will take years to execute,' it added.
Looking ahead, Moody's expects the interest rate environment to become more accommodative in the second half of 2025, both globally and across the APAC region, in response to a weaker economic outlook.
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