The Trade War That’s Reshaping Global Commerce
The US-China trade war, reignited under US President Donald Trump’s aggressive tariff policies, has once again disrupted global trade flows. In a bold escalation, the US recently raised tariffs on Chinese imports to an unprecedented 245%, following Beijing’s continued confrontational stance. This protectionist wave, aimed at protecting American manufacturing, is expected to cut deep into China’s $440 billion annual exports to the US—a seismic shift that’s reverberating across international markets.
Amid the fallout, India finds itself in a pivotal position. With the world’s two largest economies locking horns, Asia’s third-largest economy now has an opportunity to reposition its export strategy, expand into new markets, and safeguard itself from a potential influx of cheap Chinese goods.
India’s Manufacturing Edge: Time to Step In
China’s curtailed access to the US market opens the door for India to step into labour-intensive sectors like textiles, electronics, engineering goods, and leather products—industries that now face punitive tariffs in the US.
India’s established presence in IT and pharmaceuticals in the American market can be complemented by scaling up exports in manufacturing sectors. Notably, India’s textile exports to the US rose by 8% in 2023, signalling potential for further growth if seized strategically.
To do so, India must resolve longstanding structural issues—fragmented supply chains, rigid labour regulations, and poor logistics infrastructure—that hinder scale and competitiveness. Programs like the Production-Linked Incentive (PLI) scheme, aimed at boosting domestic manufacturing, need accelerated implementation to bridge these gaps and attract relocated global supply chains.
China’s Oversupply Threat: The Flip Side of the Opportunity
While trade tensions shrink China’s access to the US, it raises the risk of Chinese manufacturers dumping surplus goods into alternative markets, including India. In 2023, China exported $101 billion worth of goods to India, dominated by electronics and machinery—sectors vulnerable to dumping.
India’s experience with solar panels, where 80% of the domestic market is flooded by Chinese imports, serves as a cautionary tale. Such practices threaten India’s domestic manufacturing and must be countered through tighter anti-dumping regulations, quality checks, and strategic tariff alignments.
Expanding Beyond the US: Diversifying Export Dependencies
While the US market presents immediate gains, India’s long-term trade resilience depends on a broader strategy—reducing reliance on the West and strengthening ties across Asia, Africa, and the Middle East.
India’s $131 billion trade with ASEAN in 2023 pales in comparison to China’s $722 billion, but it’s a start. New free trade agreements (FTAs) with countries like UAE and Australia, and ongoing negotiations with the EU and UK, reflect India’s intent to globalise its footprint. Greater regional integration through platforms like the South Asia Subregional Economic Cooperation (SASEC) could reduce tariff barriers averaging 15–20% across SAARC nations and increase exports to Bangladesh, Sri Lanka, and beyond.
Strategic Urgency in an Uncertain Trade Landscape
The current trade climate is a wake-up call for India. Trump’s tariffs on China are not just punitive—they’re catalytic. India must swiftly capitalise on its “China+1” appeal, attract multinational manufacturers looking for alternatives, and deepen trade relationships across emerging markets.
At the same time, robust policy measures are needed to protect Indian industries from becoming dumping grounds for surplus Chinese goods. Strengthening anti-dumping frameworks, logistics, and export incentives will ensure India remains competitive and resilient.
In an era of fragmented global trade, strategic diversification is not just prudent—it’s imperative. India’s response to this reshaped world order could define its place in the next generation of global supply chains.
(With inputs from agencies)
