US-China Tariff Cuts: What It Means For India's Manufacturing Sector? Experts Decode Impact

New Delhi: Amid global trade war sparked by US President Donald Trump's massive tariffs, in a surprising move, China and the US decided to cut down on tariffs on each other's goods for an initial 90-day period, aimed at easing a trade tension between the two major economies.

According to the joint statement released by the White House on Monday, the US will cut tariffs on most Chinese imports from 145% to 24% by May 14, including the fentanyl rate, while Chinese tariffs on US goods will decrease from 125% to 10% during this 90-day period.

The critical question now is how the tariff reductions by China and the US might affect India. It is important to recognise that the trade disputes between these two countries have inadvertently favoured India, as American companies have turned to Indian suppliers in response to the 145 percent tariffs on Chinese goods. Moreover, these tensions have created opportunities for India to strengthen its economic ties with Western markets.

When ETV Bharat spoke to India's former ambassador to the US Meera Shankar, she said, "The US strategy is to de-risk from over dependence on China and not to decouple their economies. To de-risk, US companies will still pursue diversification strategies looking for alternative sources of supply. This has been called a 'China plus one' strategy. India could continue to benefit, but it needs to expand its manufacturing capabilities in a globally competitive way. India also needs to leverage the size of its market to attract more foreign direct investment in the manufacturing sector. In one way, this could be beneficial for India, as many of our exports have Chinese ingredients, such as Pharmaceuticals, and this could ease the pressure on them."

On Sunday, officials from China and the US announced significant advancements in the trade talks taking place in Geneva. US Treasury Secretary Scott Bessent stated, "I am happy to report that we made substantial progress between the United States and China in the very important trade talks. First, I want to thank our Swiss host. The Swiss government has been very kind in providing us this wonderful venue, and I think that has led to a great deal of productivity we have seen. We will be giving details tomorrow, but I can tell you that the talks were productive. We had the vice premier, two vice ministers, who were integrally involved, Ambassador Jamieson, and me. And I spoke to President Trump, as did Ambassador Jamieson, last night, and he is fully informed of what is going on. So, there will be a complete briefing tomorrow morning."

Meanwhile, US Trade Representative Ambassador Jamieson Greer noted, "This was, as the Secretary pointed out, a very constructive two days. It is important to understand how quickly we were able to come to agreement, which reflects that perhaps the differences were not as large as was thought. There was a lot of groundwork that went into these two days. Just remember why we're here in the first place — the United States has a massive $1.2 trillion trade deficit, so the President declared a national emergency and imposed tariffs, and we're confident that the deal we struck with our Chinese partners will help us to work towards resolving that national emergency."

"The impact of the US-China trade deal in India will be mediated by other contextual factors. Ceteris paribus, the final level of tariffs that the US ultimately imposes on both China and India after negotiating trade deals with them will impact the Indian firms' market access to the US. So, we also need to wait for the outcome of the ongoing Indo-US trade negotiations to gauge the full impact. But, beyond just tariff considerations, the ability of Indian firms to compete with China to gain market share in the US is contingent on the ability to produce better quality goods at lower prices. Indian firms' productivity, in turn, should also be seen as a decisive factor that shapes our export competitiveness. By investing in infrastructure, cutting down on onerous regulations, and offering incentives to firms, the Indian government is doing a good job in building a competitive manufacturing base," Sanjeet Kashyap, a PhD scholar at the Centre for International Politics, Jawaharlal Nehru University told ETV Bharat.

On possible implications for India as both China and US rolled back tariffs, he said, "The bipartisan American framing of the PRC as a strategic competitor as well as their imposition of tariffs generate certain medium-term signals for multinational corporations that makes the current geopolitical situation favourable for India, no matter what the outcome of current round of the Sino-US trade talks. The corporations are increasingly now attuned to the risk of supply chain dependency on China; let's not forget that China might also leverage its supply chain dominance to inflict punishment on the multinational corporations. Hence, the uncertainty and risks emanating from the current international political environment will act as a push factor for firms to diversify the production away from China. In that sense, India still retains a window of opportunity after a Sino-US trade deal."

After the talks between US and Chinese officials in Geneva, aimed at easing trade tension, the US President on Sunday hailed the discussions as "very good" and a "total reset" negotiated in a friendly but constructive manner.

"A very good meeting with China, in Switzerland. Many things discussed, much agreed to. A total reset negotiated in a friendly, but constructive, manner. We want to see, for the good of both China and the US, an opening up of China to American business. GREAT PROGRESS MADE!!!," Donald Trump wrote on his truth social platform.

According to sources, the trade conflict, triggered by Trump's implementation of tariffs as high as 145% on Chinese goods, coupled with China's countermeasures of 125% tariffs, has caused significant disruptions in supply chains, affected market stability, and hindered economic growth in both nations.

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