INDIA’S OPPORTUNITIES AND CHALLENGES

The ongoing tussle between two global supergiants, the US and China, took an alarming turn when Trump raised tariffs on China to 145 per cent, to which China retaliated by imposing 125 per cent tariffs on US goods. Other countries, such as India, with a reciprocal tariff rate of 26 per cent, Vietnam (46 per cent), and the European Union (20 per cent), were given 90 days of pause to negotiate trade deals with the US. The escalating trade war between the US and China has sent shocks throughout global markets, thereby changing economic relationships and supply networks. Recent developments resulting from Trump’s tariff policies have given nations like India both opportunities and challenges. India has to be ready to take advantage of this geopolitical turnaround with strategic manoeuvring, maybe replacing China in the US market while using tariffs as a negotiating tool to boost its international trade position.

India’s strong economic fundamentals make it wellsuited to gain from the USChina trade conflict. India’s growth is rooted in domestic consumption and services, unlike China, whose export-driven economy depends much on the US market. In 2024-25, US remained India’s largest trading partner at $131.84 billion, (India’s Exports $87.4 billion, Imports $ 45 billion), China on the other hand remained the second largest trading partner at $ 127.7 billion (India’s Exports $ 14.25 billion, Imports $113.45 billion), whereas the US- China mutual trade touched $583 billion, ($143.55 billion in U.S. exports to China and $438.95 billion in imports from China). The trade equations are - the U.S. has a trade deficit of $295.4 billion with China, and India has a trade deficit of $99.2 billion with China and a trade surplus of $ 42.4 billion with US. With businesses looking for substitutes for Chinese manufacturing, the US-China trade conflict has hastened the diversification of international supply chains. India is a desirable location because of its strong information technology sector, growing electronics sector, and aggressive pharmaceutical market. India’s textile and clothing sectors stand to benefit as higher tariffs on Bangladeshi, Vietnamese products compromise their competitiveness.

India needs to concentrate on – manufacturing competitiveness by simplifying rules and lowering logistic expenses, implementing single window trade documentation system, offering production-linked incentives, reforming labour laws, strengthening contract enforcement, and positioning itself as a dependable business destination, improved infrastructure in ports, highways, and digital connectivity, and enter into mutually beneficial trade agreements if it hopes to substitute China in the US market.

Trump’s tariff gambit came amid growing apprehension in the American people that he may have overplayed his hand in trying to paint China into a corner without rallying support from the rest of the world. Not to forget, China has a strategic and exclusive edge over crucial rare earths that it has partially banned the US from accessing, and may ban all in the future. It holds $750 billion in US treasury bonds and can use this reserve as a geopolitical lever, potentially inflicting damage on US markets, economic growth and the dollar as well. The global environment is full of apprehensions about what if, after infuriating the rest of the world, putting tariffs on them, too, China emerges stronger, reliable, farsighted, and strategic in the eyes of all these other countries that are now looking for an exit from the unreliable consequences of the Trump era. And to this end, the US analysts are increasingly looking at India to take advantage of the tariff differential. The pause on reciprocal tariffs gives India breathing room to bargain advantageous conditions, However, India’s dreams of becoming a new factory to the world are beset with familiar problems like lack of skilled workers, supply chain issues, infrastructure shortcomings and red tape.

The prevailing trade war between the US and China has presented India with new opportunities, but has some inherent risks. With the US and European Union imposing higher tariffs on imports from countries like China, Vietnam, and Bangladesh, India suddenly finds itself in a favourable position. This could be a rare opening. Indian exporters have the chance to fill the gap left by restricted Chinese goods. But there’s a bigger threat: China, facing excess stock, might start dumping its products, especially electronics and machinery, into markets like the UK, Germany, and the UAE, which are also important for Indian exports. Competing with such cheap goods could be an uphill battle for Indian producers. Industries such as electronics, pharmaceuticals, and auto parts rely on smooth global trade links, and if those get blocked or delayed, it causes serious setbacks. India must focus on boosting manufacturing capacity, resolving supply chain issues, and keeping production costs competitive.

For the past 10 years, Mr. Modi has been aiming for one goal: Make in India, and India has been trying to pitch into China’s manufacturing business for a long now, but it looks like our industry has not played up well so far. However, now, when India’s biggest economic rival, China, is facing worse tariffs, an opportunity has sprung up. Meanwhile, India’s position may be solidified by a bilateral trade agreement (BTA) with the US, EU and other developed economies. India has a low-cost manufacturing edge, negotiations of which progressed notably in 2024, and India should aim for zero tariffs on medicines and automobiles. India can present itself as a reliable, long-term partner instead of just a rerouting centre for Chinese items for the US and other countries. As Trump’s tariffs bite into Chinese exports, Apple is just the beginning; sectors like automobiles, chemicals, electronics, and textiles have tremendous scope in the coming days.

To prevent escalation, India should also keep friendly ties with China. Cooperation can be helped by strengthening trade within BRICS and the Shanghai Cooperation Organisation. India might offer joint ventures in renewable or technology, presenting itself as a collaborator rather than a competitor. This measured strategy guarantees India gains from China’s financial difficulties without estranging an important partner.

THE VIEWS EXPRESSED BY THE AUTHOR ARE PERSONAL

Col Rajesh Bhukar, The writer is a Post Graduate in International Studies, Alumni of Defence Services Staff College, Wellington and College of Combat, Mhow