With US Vice-President JD Vance visiting India on April 21, New Delhi faces a crucial moment to reassess its trade approach with Washington. The sharp rise in US tariffs on Chinese goods has opened up rare export opportunities for countries like India — but it has also brought new risks, including trade diversion, dumping, and unpredictable US demands. In these challenging times, Indian businesses and the government must stay focused — identify where it can gain, protect what it cannot give up, and reform what holds it back. The opportunities Since January 20, US President Trump has rolled out a wave of tariffs. Most countries now face a 10 per cent duty up to July 8, but Chinese goods are hit much harder — with tariffs up to 245 per cent. Today’s US tariffs on China are: 245 per cent on syringes, 173 per cent on lithium-ion batteries, 169 per cent on wool sweaters, 145 per cent on toys and puzzles, and 20 per cent on laptops. The sharp gap between China and rest of the world is already reshaping global trade, opening short-term export opportunities for others, including India. Shift in trade flows The sharp tariff gap is set to alter flow of goods — especially in sectors where the US heavily depends on China. Electronics will see some of the biggest changes: China supplies 78 per cent of US imports of printed circuit boards, LED lights, USB cables, and electric transformers. With tariffs on these goods now as high as 245 per cent, investors and traders are actively looking for new supply sources. This trade shift won’t be limited to electronics. China also provides 75 per cent of US imports of furniture, toys, medical gloves, 67 per cent of drills and cooling fans, and 60 per cent of footwear. These percentages refer to specific products. For broader categories, see table. Other specific, high-dependence categories include plastic kitchenware (80 per cent), garments and bed linens (71 per cent), screws and hinges (75 per cent), aluminium foil and copper tubes (69 per cent), ceramic tiles and glassware (64 per cent), pharmaceutical ingredients (72 per cent), and even decorative items like artificial flowers and umbrellas (86 per cent). India: Risks, Opportunities As global firms search for alternatives, countries like India, Vietnam, and Mexico could see a surge in demand for new business ventures or expanding existing ones. Three main trade models are now emerging in response: Risky re-routing of goods: Some traders may try to bypass tariffs by shipping finished Chinese products through their home countries and relabeling them as local exports to the US. However, this violates US rules of origin and could result in severe penalties. The US monitors such misrepresentation, making this a dangerous and unsustainable option. Dumping of surplus Chinese goods: As US imports from China fall, China may offload excess stock into other countries at lower prices. This raises the risk of dumping, especially in developing markets. India’s trade watchdog, the DGTR, monitors for sudden surges in low-priced imports across sectors that damage Indian industry. New production hubs outside China: The most viable model is setting up manufacturing units in India, Vietnam, and Mexico. Such units will import Chinese components and intermediates, perform substantial local processing, and export the finished goods to the US and other countries. This legally satisfies origin rules and allows firms to benefit from lower tariffs. Sectors such as toys, garments, steel products, engineering goods, electronics, furniture, kitchenware, and auto parts are already seeing interest. Indian firms are receiving inquiries from global buyers seeking joint production or outsourcing. As the duration of Trump’s tariffs remains uncertain, most companies are focusing on quick, value-added assembly rather than deep manufacturing from scratch. Choices before Indian govt Time not ripe for a full-scale FTA with the US: India is currently the only country actively negotiating an FTA with the Trump administration — an unpredictable partner. While most countries are being asked to reduce tariffs, India through FTA will be under pressure to accept sweeping demands: opening up its agricultural market to US agribusiness, relaxing dairy and GMO food restrictions, weakening the Minimum Support Price (MSP) system, allowing unfettered data access for US digital firms, diluting pharmaceutical patent rules, and enabling American e-commerce giants to bypass Indian FDI regulations. Agreeing to these far-reaching demands could permanently damage India’s food security, public health systems, small businesses, and digital sovereignty. In the volatile global trade climate, locking into long-term commitments without clarity on the US’s broader trade direction is risky. Rather than pursuing a sweeping FTA, India could offer the US a focused ‘zero-for-zero’ tariff deal — eliminating duties on 90 per cent of industrial goods, while keeping agriculture and automobiles off the table. Despite government hesitation, ‘zero-for-zero’ could be a safe and strategic move. India already grants zero-duty access on similar products to ASEAN, Japan, and South Korea under existing FTAs. Even the EU has proposed a comparable industrial goods pact to the US. Agricultural trade remains far too sensitive to include — and rightly so ‘zero-for-zero’ will also spare India in dealing with numerous demand in domestic policy area and restrict agreement to tariffs and trade. Industry bodies across engineering, textiles, chemicals, and pharmaceuticals are supportive of the ‘zero-for-zero’ approach. Crucially, India must resist US pressure to lower car tariffs, which could harm a sector that contributes nearly one-third of India’s manufacturing GDP. We must recall the collapse of Australia’s auto industry after tariff cuts in the 1990s. With the US self-imposed 90-day deadline ending July 8, India could publicly release a ‘zero-for-zero’ product list it’s ready to eliminate tariffs on 90 per cent of the US goods — mirroring Trump’s tactics — and signal its willingness to engage on fair and transparent terms, without compromising core national interests. Looking beyond US India should fast-track FTA talks with the EU, UK, and Canada while exploring stronger economic ties with China, Russia, Japan, South Korea, and ASEAN. Indian officials should avoid political messaging that discourages trade with China in favour of the US. The next three months will be critical for India. Choices made now in response to aggressive US tariff moves could shape the country’s trade future for years. A careful, strategic approach is vital. The writer is the founder of GTRI Published on April 18, 2025