U.S.-China trade agreement a mixed bag for India, say trade experts
Trade experts are divided on how the temporary trade agreement between the U.S. and China would affect India. Some argue that the deal carries opportunities for India, especially in sectors such as pharmaceutical APIs, gems and jewellery, engineering goods, organic chemicals, and IT-enabled services.
Others, however, say investments that had been coming in due to high tariffs on China could now return to that country.
Also read: Markets log biggest single-day gains as border tensions ease, U.S.-China lower tariffs
In a significant thawing of trade relations between the world's two largest economies in the world, the U.S. and China on Monday (May 12, 2025) issued a joint statement saying they would temporarily substantially walk back the tariff escalation the two countries had levied on each other over the last few months.
Following negotiations over the weekend in Geneva, Switzerland, the U.S. announced it would reduce tariffs on China to 30% from the 145% it had raised them to. China agreed to reduce duties on U.S. goods to 10%, down from 125%.
These relaxed tariffs are to be in place for a period of 90 days starting May 14. The two countries further said that they would continue talks to further work out their issues.
'The reduction in tariffs will likely result in a surge of U.S.-China bilateral trade in high-value segments such as electronics, machinery, and chemicals,' S.C. Ralhan, President of the Federation of Indian Export Organisations (FIEO) said.
'However, India can leverage this shift to strengthen exports in sectors that remain relatively insulated from US-China trade, such as pharmaceutical APIs, gems and jewellery, engineering goods, organic chemicals, and IT-enabled services, etc.,' he added.
Former Director General of Foreign Trade Ajay Srivastava, however, pointed out that this deal in its current form does not address the underlying issues such as the high trade imbalance between the two countries, which was U.S. President Donald Trump's main grouse in the first place. Further, he added that this agreement could have adverse implications for India.
'As the tariff gap narrows, companies that had shifted production to places like Vietnam, India, or Mexico may return to China,' Mr. Srivastava said. 'The 'China Plus One' strategy could quietly fade. Ironically, this deal could undo the very diversification the tariff war aimed to spark.'
Other trade economists say that lower tariffs between the U.S. and China could result in a reprieve from the 'dumping' of Chinese goods that countries like India and Vietnam have faced, and have sought to protect themselves against.
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