Blitz Bureau
NEW DELHI: The United States and China have pressed the brakes on their escalating tariff battle, agreeing to a 90-day pause that slashes duties on hundreds of goods. It is more than just a diplomatic breather – it’s a move that has redrawn the contours of global commerce.
For India, the ripple effect is immediate and sobering.
During the height of US-China hostilities, Indian exporters had seized a rare window of opportunity. As tariffs locked out Chinese goods, sectors like textiles, leather, pharmaceuticals, and engineering found eager new buyers in the US market. But with American tariffs on Chinese imports now drastically reduced from 145 per cent to 30 per cent, and China’s duties on US goods trimmed from 125 per cent to 10 per cent, that window is fast closing.
The tariff advantage that gave India a temporary edge is vanishing — and with it, the breathing space Indian exporters had come to rely on.
Pause in US-China tariff war puts paid to hopes of Indian exporters looking to benefit from gaps in supply chain
One of the most immediate setbacks is the erosion of India’s price advantage. Chinese manufacturers — known for their scale, subsidies, and integrated supply chains — can now re-enter the US market at far more attractive rates. Indian firms, burdened by rising costs for energy, logistics, and regulatory compliance, are struggling to match those prices.
In sectors like footwear, where India has historically focused on leather products, the US market’s tilt toward synthetic materials plays into China’s strengths. Mecca Rafeeque Ahmed, past president of the Federation of Indian Export Organisations (FIEO), notes that while Indian firms are attempting to diversify, countries like Bangladesh may outpace them due to better integration with China-centric value chains.
Western buyers who had diversified sourcing to India, Vietnam, and Bangladesh during the US-China standoff may now revert to familiar Chinese suppliers. Chinese firms, with their fast turnarounds and superior supply chain integration, are expected to claw back market share rapidly — especially in electronics, garments, and consumer goods. Ajay Sahai, Director General of FIEO, warns that Chinese resurgence in the US market will be “swift and intense,” urging Indian businesses to invest in value addition, branding, and supply chain efficiency to stay competitive.
The challenge is magnified by India’s uneven progress in building strategic capacities. Despite targeted government support, including the Production Linked Incentive (PLI) scheme, India’s electronics sector continues to rely heavily on imported components — many of them from China. In textiles, too, the gap in efficiency and scale remains wide. A Delhi-based textile exporter summed it up: “The tariff war gave us breathing space, but not enough firms used that time to modernise or upgrade. Now we’re back in a tougher fight.”
Adding to the pressure is the broader macroeconomic impact of revived US-China trade flows. As industrial activity picks up, global demand for raw materials like steel, copper, and cotton is rising — pushing up input costs for Indian exporters and squeezing already thin margins.
Yet, the story is not all grim. In fact, the trade détente may accelerate the diversification strategy adopted by multinational corporations wary of overdependence on a single country. India stands to benefit, provided it can position itself not just as a backup to China, but as a credible, scalable alternative.
The electronics and mobile manufacturing sectors illustrate this opportunity. Companies like Apple, Samsung, and Foxconn are expanding operations in India, driven by PLI incentives and the promise of a large domestic market. Importantly, even with reduced tariffs, Chinese firms remain under strategic scrutiny in the West — especially in tech hardware — offering India an advantage rooted in its democratic alignment and diplomatic neutrality.
This trend is reinforced by the larger “China plus one” strategy that is guiding global boardrooms. India’s demographic edge, growing base of skilled labour, and improving logistics backbone make it a natural contender. Though it faces stiff competition from Vietnam, Indonesia, and Mexico, India offers something others don’t: scale, demand, and an increasingly diversified manufacturing base — from pharmaceuticals to chemicals and renewable energy components.
Investor sentiment reflects this shift. India’s macroeconomic stability, emphasis on ease of doing business, and policy continuity have attracted strong foreign capital inflows. The rupee has held steady, and investor appetite remains robust, particularly as India signals intent to become a $5 trillion economy and a global manufacturing hub by the decade’s end.
Trade diplomacy is another lever. India’s recent deals with the UAE and Australia, and ongoing negotiations with the US and EU, are aimed at deeper integration into global value chains. New Delhi’s offer to reduce tariffs on over half of US imports — worth $23 billion — in exchange for reciprocal market access underlines its proactive trade stance and signals a more mature economic strategy.
What could ultimately tip the scales in India’s favour is infrastructure. The Government’s push on logistics corridors, green energy, semiconductor parks, and digital connectivity is slowly but surely improving competitiveness. Faster delivery timelines and reduced operational costs could make Indian products more appealing — not just because of policy, but because of performance.