To ease the trade war between the two largest economic giants, the US and China began trade talks in Geneva this Saturday. While Washington is looking for ways to reduce its $295 billion trade deficit with Beijing, China is seeking to lower its 145% U.S tariffs to participate in the US market as an equal player. After the US President’s statement, “80 per cent tariffs on China seem right,” potentially paved the way for a trade deal. Both countries are focusing on mutual tariff reduction and broader economic cooperation. Chief Investment Officer Alejo Czerwonko stated, “This is the mother of all negotiations.”This article explores how U.S. tariffs on China have begun to benefit India and examines the future implications for MSMEs amid ongoing trade negotiations.
The Tariff Tangle: U.S. vs. China
On the 2nd April, the US president, Donald Trump, imposed 145% levies on Chinese goods along with a bunch of other countries. Labelling this move as trade bullying, China swiftly retaliated with 125% tariffs on the US. As the largest trade partner of the US, with $688.3 billion in total trade, and exports $524.7 billion of its goods into the US market, China has swiftly started losing foothold in the American market.
The tariffs on Chinese EVs increased to 102.5% from a previous total of 27.5%. Tariffs on Chinese semiconductors are set to double to 50%. Solar cells have increased from 25% to 50%, with additional levies on solar-grade polysilicon, wafers, and cells reaching 60%. Lithium-ion batteries for EVs risen from 7.5% to 25%.
On the other hand, China Tariffs on U.S goods have significantly impacted various sectors of the U.S, increasing disruptions in manufacturing, costs for consumers, and heightened inflationary pressures. As China is the largest importer of the US’s soybeans, corn, and poultry, US farmers have been adversely affected by facing steep tariffs.
Notably, China’s Ministry of Commerce data showed that while China’s exports to the US fell by over 20% in April, thanks to the ASEAN and other markets that helped to buoy the Chinese trade, even rising its exports by 8.1%, indicating a limited impact of US tariffs.
Why This is Good for India
As the tensions rise between the two large economies, US buyers started turning towards Indian suppliers. These tensions have also enhanced India’s potential to strengthen trade and economic ties with the West.
Richard Baldwin, Professor of International Economics at IMD Business School, stated to the Indian Express that prolonged high tariffs on China would benefit large emerging markets. He also added, “From a geo-economic perspective, anything that’s bad for China is good for India.”
According to the Federation of Indian Export Organisations(FIEO), to fill the void in the US market, India could gain up to $25 billion in additional exports in sectors like textiles, electronics, automotive components, chemicals, and footwear.
Take the example of Indian wire and cables maker, RR Kabel, this company expects volume growth to more than double in fiscal 2026, between 16% and 18%. This company turns the U.S. tariff policy into an opportunity. As of now, the U.S. is RR Kabel’s fourth-largest market by revenue, which makes up to 10% of the company’s export revenue.
In the electronics and smartphone sector, companies like Apple are shifting it’s location from China to India by 2026, aiming to produce over 60 million units annually. Foxconn and Tata Electronics are willing to facilitate this move through partnerships, enabling Apple to alleviate tariff impacts and reduce dependency on Chinese manufacturing.
The American clothing industry is also increasingly sourcing garments from India. Textile hubs like Tiruppur in Tamil Nadu are observing an abundance of demand from the US retailers.
What’s the Future Hold
The current trade deal between the US and China may not be in the interest of India. This negotiation might reduce the chances of capitalising on this geo-strategic opportunity. Until now, Chinese exporters would approach Indian suppliers for help in fulfilling US orders, as they seek to retain their US clients. A potential trade deal between US-China lowering tariffs on Chinese goods could quickly help Chinese exporter recover, due to their superior technical expertise.
Conclusion
It is true that due to the U.S.-China tariff war, India is enjoying the short-term opportunities, especially in sectors like textiles, electronics, and industrial components, but the long-term gains remain uncertain. Between the global supply chain and the West’s appetite for alternatives to Chinese manufacturing, India’s MSMEs stand to benefit. However, these opportunities are fragile and depend on the outcome of ongoing trade negotiations in Geneva. If the US and China reach a compromise, the window for India to harden its role as a reliable manufacturing and export hub may narrow. To fully capitalise this opportunity, India must not only escalate production capacity but should also address bottlenecks in compliance, logistics, and infrastructure. The road ahead seems promising, but it requires foresight.