India’s Strategic Position in the US-China Trade Tariff War
With the recent trade tariff measures imposed by the US, it seems India may find itself in a position similar to the one we held during the Russia-Ukraine war—remaining neutral yet emerging as one of the biggest beneficiaries of the conflict.
Let’s break this down into two possible scenarios:
Case 1 – Genuine Manufacturing Shift to India
This is a straightforward situation.
Imagine a product, If China manufactures it for Rs. 20 and, after a 50% import tax, sells it in the US at Rs. 30, while India produces the same product at Rs. 30 and—after a 25% import tax—sells it for Rs. 37.5, the cost difference becomes evident.
While China’s version is still cheaper, many companies with strong ESG (Environmental, Social, and Governance) commitments, along with pressure from their governments to reduce dependence on China, would still prefer India despite the higher cost. This scenario will bring some genuine manufacturing opportunities and FDI into India.
Case 2 – Assembly Hub Strategy (Just like in Russia-Ukraine war we become oil refineries of the world)
This is a more complex but equally likely scenario.
Here, India may become just an assembly hub, while most of the core manufacturing still happens in China. Indian companies might import semi-finished or key components from China, assemble the final product here, and then export to the US.
In such a case, India becomes a workaround for Chinese companies to bypass tariffs—not a full-fledged manufacturing alternative.
We are already witnessing this trend. Several Chinese companies have entered into collaborations and joint ventures with Indian firms. This allows them to use India as a base to access global markets, particularly the US, amid rising trade barriers.
Final Thoughts
India stands at a strategic crossroads. This tariff war between the US and China presents a real chance for us to emerge as a key player in global supply chains. But if we’re not careful, we may repeat past mistakes.
Take the Russia-Ukraine conflict, for example. While we did benefit from discounted oil and made a few billion dollars in profit, we failed to convert that short-term gain into any meaningful long-term asset—no significant infrastructure, no energy reserves, no strategic oil partnerships were built out of that opportunity. It was a missed chance to create lasting value.
Similarly, if this tariff shift is not handled properly, it might go down the same path. Yes, India might make billions by positioning itself as an alternate route or assembly hub—but without real investments in core manufacturing, supply chain ecosystems, or technology infrastructure, we’ll miss the opportunity to become a true global manufacturing power.
It’s not just about attracting investments; it’s about the kind of investments we attract. Are we building capabilities? Are we creating jobs at scale? Or are we simply offering a backdoor to China?
I remain cautiously optimistic, but honestly, I highly doubt we’ll make a killing from this tariff war unless there’s a focused, long-term strategy in place. The risk is that we profit in the short term but once again fail to build anything of substance for the future.
Maal china ka hi, jayega India se.