Part 6 of 8 part series – exploring India’s unstoppable growth and the challenges it must navigate

Can India Navigate the Trade Storms?

India’s trade landscape is buzzing with opportunity and peril. A surge in exports to the United States, fueled by global supply chain shifts, signals a potential boom. Yet, looming U.S. tariffs and India’s reliance on Chinese imports threaten to derail this momentum. Can India seize its moment as a manufacturing hub while dodging these trade storms?

The Export Surge: A Golden Opportunity

India’s exports are soaring, particularly to the U.S., where merchandise shipments jumped 22% year-on-year to $17.25 billion in May 2025. Electronics, textiles, and pharmaceuticals lead the charge, with firms like Dixon Technologies and Tata Consumer Products fielding a surge of U.S. inquiries. This boom stems from U.S. tariffs on Chinese goods, reduced from 145% to 30% but still high, pushing importers to pivot to India, where baseline tariffs are a modest 10% (with a 26% levy suspended until July 9). Foxconn’s iPhone exports from India, nearly all U.S.-bound between March and May 2025, underscore India’s rising role.

A stable rupee, robust foreign reserves, and a thriving services sector bolster this growth. Talks of an India-U.S. bilateral trade agreement (BTA) by September 2025 fuel optimism, with industry leaders eyeing it as a catalyst for private investment and market access. Yet, storm clouds gather.

Tariff Threats: A Costly Challenge

President Trump’s “America First” trade policy casts a shadow. A 10% baseline tariff on imports from 57 countries, including India, began in April 2025, while a 50% tariff on steel and aluminum, effective June 4 under Section 232, threatens India’s $5 billion export sector. The Engineering Export Promotion Council warns that these tariffs erode competitiveness in products like stainless steel pipes and auto components, with exporters delaying shipments amid uncertainty.

India’s $37 billion trade surplus with the U.S. in 2024-25, driven by software services, and its high tariffs on U.S. imports have irked the Trump administration, prompting threats of a 26% reciprocal tariff post-July 9. India’s push to repeal these tariffs and secure stability has stalled talks, raising the stakes.

The China Factor: Opportunity Meets Dependency

China’s trade reorientation complicates the picture. Facing U.S. tariffs, China’s exports to India surged 12.4% to $11.13 billion in May 2025, ballooning the trade deficit to $100 billion. The Global Trade Research Initiative cautions against “dumping” cheap goods, which threatens Indian manufacturers. Herein lies a fallacy: many Indian private firms rely on low-cost Chinese imports—like smartphone components and pharmaceutical APIs—to compete domestically, limiting funds for export-focused innovation.

Yet, China’s woes offer India a chance. As U.S. importers shun China, firms like Gokaldas Exports capitalize on tariff advantages and Bangladesh’s instability. But replacing China demands massive investments in technology, like automation and semiconductors, and a skilled workforce of millions—areas where India lags. Private sector participation is crucial, yet firms face a Catch-22: their reliance on Chinese inputs hampers R&D and capacity building. While the Production-Linked Incentive (PLI) scheme aims to boost domestic manufacturing, breaking this dependency requires bold private investment.

Navigating the Storm

India’s path forward hinges on three strategies:

India’s export boom, fueled by U.S. demand and China’s pivot, offers a historic opportunity. But U.S. tariffs and import dependency demand agility. By securing trade deals, diversifying markets, and investing in technology and manpower, India can dodge the storms and emerge as a global trade powerhouse. The clock is ticking.