### Shifting Dynamics: US Tariff Relaxation and Its Impact on India-China Trade Relations
In a strategic move, US President Donald Trump has relaxed tariffs on India, linking the decision to India’s reduction of crude oil imports from Russia. The lowering of reciprocal tariffs from 25% to 18%, coupled with the withdrawal of a 25% penalty on these oil imports, signifies a notable shift in the intricate tapestry of India-China trade relations. This evolving landscape intertwines trade with pressing national security concerns, particularly given the backdrop of geopolitical maneuvering.
### The Role of Imports in India’s Industrial Growth
India’s relationship with large imports from China has often been viewed through a lens of concern due to the persistent trade deficit. However, a crucial re-evaluation is underway. Rather than posing a threat, these imports are increasingly recognized as a linchpin in the growth of new industries. As traditional sectors fade into the background, imports from China are becoming indispensable for boosting sectors such as electronics, which are now leading the charge in India’s export performance.
### The Rise of Electronic Goods in India’s Export Basket
The Make in India initiative has significantly reshaped the export landscape. Over the past decade, electronic goods have surged to become the dominant force in India’s export basket, a trend that is evidenced by their movement from the 7th to the 3rd position from 2014-2025. The share of electronics in total exports jumped from a modest 2.4% in 2014-2015 to an impressive 9.4% in 2024-2025, showcasing the paradigm shift within India’s manufacturing narrative.
### Factors Behind the Surge in Electronics Manufacturing
The jump in electronic goods production was staggering — a six-fold increase from $21.3 billion in 2014-2015 to $127 billion in 2024-2025. As the world’s second-largest mobile phone manufacturer, India’s electronic sector owes a significant debt to its Chinese counterparts. Nearly 39.7% of India’s electronic imports came from China, which primarily involve critical components such as printed circuit boards (PCBs), display panels, and semiconductor devices.
### Foreign Direct Investment Trends in Response to Geopolitical Tensions
India’s approach to foreign direct investment (FDI) from China has become cautious, given security concerns. The restrictive policies surrounding Chinese FDI mean that automatic routes are no longer an option. This deliberate shift reflects broader anxieties regarding national security intertwined with economic growth.
### Beyond Electronics: The Broader Spectrum of Chinese Imports
Beyond electronics, China remains a crucial player in providing components essential for telecommunications and automobile manufacturing. This support underlines China’s integral role in the supply chain of various Indian industries. The Indian engineering sector, particularly the automobile industry — which contributes 7.1% to the GDP — has experienced a boom, spurred by both domestic initiatives and imports from China.
### Changing Export Landscapes: Analyzing Trends and Shifts
The reshaping of India’s export basket is evident, as electronics and engineering goods accounted for 34.4% of total exports in 2024-25, a significant rise from 15.3% in 2000-01. Traditional industries such as textiles, garments, and agriculture have slipped to just a fraction of the export basket. This ongoing evolution signifies a departure from reliance on older industries towards a future anchored in technology and high-value manufacturing.
### Competitive Edge: India vs. Vietnam in the US Market
Trump’s tariff relaxation could bolster India’s manufacturing by leveraging the Chinese supply chain, potentially giving it an edge over Vietnam, a country that has been the alternative conduit for Chinese exports to the US. While Vietnam has enjoyed lower tariffs — 20% compared to India’s 50% — it faces the challenge of a significant transshipment tariff of 45% on goods rerouted through third countries. This backdoor entry strategy has been China’s response to earlier tariffs imposed during Trump’s presidency.
### Emerging Opportunities: Repositioning Within Global Trade
With Vietnam’s relationship with the US complicated by punitive tariffs, India finds itself with a golden opportunity to attract Chinese investments and meet growing supply chain demands. This diversification in exports could serve as a robust counterbalance to the burgeoning electronic goods market, which, as of 2024-2025, constituted nearly 17.6% of India’s total exports to the USA.
### Navigating Tariff Structures: India’s Strategic Position
India’s electronic goods exports to the US enjoy an exemption from Trump’s tariffs, giving it a notable advantage. As the third largest manufacturer of electronics, the landscape provides ample opportunity for India to position itself strongly against Vietnam, especially considering the heightened transshipment tariffs affecting Vietnam’s export competitiveness to the US.