India Hopeful of Tariffs War Spin Offs

On April 9, US President Donald Trump announced a 90-day pause on reciprocal tariffs, except for China – where it was increased to 125% from 104% following the Asian giant’s retaliatory announcement of additional tariffs. 

All other countries during this period will witness rates fall down to the universal 10%. China retaliated by revising tariffs on US exports. The measures heightened tensions and affected several sectors – from agriculture to consumer electronics.

 The Dragon’s approach combined retaliatory tariffs with long-term strategic initiatives to bolster domestic innovation, reducing dependence on foreign technologies and establishing self-reliance.

The tariff war is a complex and multifaceted economic conflict. It has been a defining feature of global trade dynamics in recent years, and involves the imposition of tariffs, or taxes on imports and exports, by countries seeking to protect domestic industries, address trade imbalances, or exert political pressure.

With the focus on US-China trade relations, there grew an opinion that Indian markets may have started feeling a positive impact of this so-called trade war. With many multinational companies searching for alternatives to a China-centric supply chain, the South Asian giant’s “Make in India” initiative gained traction. It is expected that India may serve as a magnet for shifting manufacturing bases. Though it may also be raising its own tariff measures to protect domestic industries, yet manage its bilateral trade balance in the context of rising global tensions.

“Apple has significantly ramped up iPhone production in India, reaching $22 billion in fiscal year 2025, a 60% increase. This shift, driven by disruptions in China and supported by Indian government incentives, sees one in five iPhones now made in India,” according to a Times of India report on April 15.

“Bloomberg reports that shipments of India-made iPhones to the United States accelerated after President Donald Trump announced plans for ‘reciprocal’ tariffs in February. The Trump administration recently exempted electronics goods, including smartphones, from these tariffs, providing temporary relief for Apple,” the report added.

However, the report also pointed out that the exemption isn’t permanent and a separate 20% duty on Chinese goods remains in place, likely encouraging Apple to continue diversifying its supply chain. “Moving away from China entirely would be challenging, as Bloomberg Intelligence previously estimated it could take eight years to shift just 10% of Apple's production capacity from China,” it further said.

“India sees opportunity, as well as risk, in Trump’s trade war,” The Economist reported on April 2. “Narendra Modi hopes to strike a deal that will unleash growth,” it said, adding, “The new tariffs’ direct impact on India’s economy will be limited.”

At the same time, it also cautioned, “The question is whether Mr Modi can meet Mr Trump’s demands, especially in politically sensitive areas such as agriculture and e-commerce. Mr Trump may push India to open government procurement to American firms and remove restrictions on data flows – demands India has long resisted.”

In this context, according to an answer placed in the Lok Sabha on March 25 by the Ministry of Commerce & Industry, “As per WTO 2023, India’s simple average tariff rate is 17%, with simple average agricultural tariff (which includes textiles) being 39% and for industrial goods 13.5% for the year 2023. The effective tariff rates were much lower through notifications issued by the Government. Post Union Budget 2025-26, the simple average industrial tariff has reduced to 10.66%.”

India has been protecting its agricultural sector to maintain food security and the livelihoods of small farmers. On the other hand, the US has been seeking an entry into India's huge agricultural market. In a recent interview, US Commerce Secretary Howard Lutnick criticised the trade barriers, saying that US “farmers have never had the opportunity to sell corn in India”.

Meanwhile, the IT and tech services sectors can be vulnerable to the overall contraction in consumer spending and reduced industrial investment influenced by the tariff-induced slowdown.

With a significant portion of apparel and footwear imported from Asia, tariffs have led to higher prices and reduced profit margins for retailers. Bangladesh, Cambodia, and Vietnam are planning to either remove, or charge nominal tariffs on US imports as part of their trade negotiations. This may affect India’s textile and apparel exports to the US. Incidentally, the US is one of the primary export destinations for Indian textiles and apparel.

Nonetheless, as per a Moneycontrol report on April 21 “Indian industry seems confident to take on imports from the US across several sectors, including chemicals, steel products, aluminium, automobiles and auto components, engineering goods, electronics, food processing and pharmaceuticals.”

Quoting sources, the report said, “While, the domestic industry is pushing for a zero-to-zero tariff regime on products that attract sectoral duties from the United States such as steel, aluminium, automobile and auto parts through the proposed trade deal, for agriculture and food processing, they are batting for reduction in duties on a reciprocal basis.”

It added that “India Inc is also ready for tariff reductions on chemicals, engineering goods, electronics, pharmaceuticals and food processing through the proposed trade deal in return for similar cuts from the US, one of the sources said.”

Overall, the economic consequences of the tariff war are profound and far-reaching. Amidst the uncertainties, countries like India will experience ripple effects, including market volatility and shifts in trade dynamics. For the US, tariffs have led to increased costs for consumers and businesses, disrupted supply chains, and strained relationships with trading partners. China has faced similar challenges, with tariffs impacting its export-driven economy and prompting efforts to diversify trade relationships.

Beyond economic impacts, the tariff war has significant geopolitical implications. It has heightened tensions between the US and China, influencing global alliances and reshaping international trade policies. The conflict has also underscored the interconnectedness of the global economy, with nations grappling with the challenges of navigating a rapidly changing trade landscape.

Given the circumstances, many consider the time may be right for India to gear up and grasp the opportunity to steal China's thunder. Amid the so-called trade war between the US and China, India can then emerge as a beneficiary given its heightened economic and strategic importance for the US.