During recent trade negotiations with the Asean bloc, Indian officials have encountered a recurring challenge: the pervasive presence of Chinese companies within the 10-member group. As India seeks to renegotiate its trade deal and offer concessions, it must carefully navigate the influence of these firms, many of which have established bases in countries like Vietnam and Indonesia. This issue mirrors a broader global dilemma, most acutely felt by the United States, which has grappled with a massive trade deficit with China—estimated at $295 billion in 2024, based on exports of $439 billion. Over the past 15 years, the U.S. trade deficit has ballooned from $882 billion in 2008 to $1.2 trillion, while China’s trade surplus has surged from under $300 billion to $823 billion, nearing the $1 trillion threshold. With American sentiment toward Beijing souring—exacerbated by the Covid-19 pandemic—President Donald Trump has made China a primary target in his second term, imposing a hefty 54% tariff on Chinese goods, including a 34% hike announced recently, on top of measures from his first term. This aggressive stance aims to curb the flood of cheap, often subsidized exports from what Trump calls a “non-market economy,” a move that could ripple through global trade networks and inadvertently create opportunities for countries like India.
The fallout from Trump’s tariffs extends beyond China’s borders, impacting nations integrated into its supply chain. Countries like Vietnam and Indonesia, which have become manufacturing hubs for Chinese firms seeking to evade U.S. tariffs, now face reciprocal duties as the true origin of goods is scrutinized. During Trump’s first term, Vietnam emerged as a hotspot for relabeling Chinese products to dodge tariffs, a practice that has since evolved into a broader “China-plus-one” diversification strategy. Today, nearly a quarter of Vietnam’s GDP is tied to exports, making it vulnerable to tariff retaliations. Similarly, Mexico has become a manufacturing base for Chinese companies aiming to leverage its proximity to the U.S. market and shed their home-country label. While Mexico has so far avoided reciprocal tariffs, the threat looms large. China’s retaliatory tariffs on the U.S., announced on Friday, have only intensified the escalating trade war, with Trump vowing to stand firm. This tit-for-tat escalation is disrupting global supply chains, pushing companies to rethink their strategies and potentially opening a window for India to position itself as an alternative manufacturing and export hub, especially as businesses seek to diversify away from China amid heightened geopolitical tensions.
For India, Trump’s focus on curbing Chinese economic dominance could prove to be a strategic boon. As the U.S. and China lock horns, Indian exporters and policymakers are eyeing opportunities to capture market share in sectors where China once dominated. The challenge, however, lies in navigating the complexities of trade with Asean, where Chinese influence remains strong, and competing in a global market reshaped by tariff barriers. Indian officials are wary of offering concessions that might inadvertently benefit Chinese firms operating in the region, a concern echoed in the U.S.’s own tariff policies. Meanwhile, the rupee’s recovery to 85/$ adds pressure on Indian exporters already grappling with Trump’s tariffs on India, which have fluctuated between 26% and 27%. Yet, the broader shift in global trade dynamics—coupled with initiatives like the restoration of export benefits and a push for bilateral deals—could position India to capitalize on the vacuum left by China’s tariff-battered exports. As oil prices dip due to the U.S.-China trade war, potentially paving the way for fuel price cuts in India, the country stands at a crossroads: it can either adapt swiftly to seize these emerging opportunities or risk being sidelined in a rapidly evolving economic landscape.
