From China to India: how Trump’s tariffs are shifting the world’s manufacturing hub
For years, India has been trying to catch up and even become the alternative manufacturing hub to China. But with the current trade war between the US and China, it may have a real advantage now. India’s economic and trade outlook must be revised after these geopolitical developments, and so should its other recent strategies regarding its strategic autonomy including “Make in India” and its diversification of trade relations into LATAM.
Tariff effect on China vs India
On April 2nd, President Trump announced his “Liberation Day” tariffs. India was facing 26% tariffs on most of its exports to the US, prior to him lowering the tariff rate to 10% for almost all nations, in his announcement of a 90-day pause (Travelli & Kumar, 2025). In contrast, China had an initial 35% rate imposed by the US, but after its response of reciprocal import levies, Trump raised it continuously, until it reached an astounding 145%. It has not gone down since, and the trade war between the two countries shows no signs of de-escalation, as both sides show an almost childish level of stubbornness.
As a result, India now looks comparatively more attractive as a manufacturing hub and trade partner for many companies and nations. Although these shifts imply costs and are timely in practice, India has already been slowly attracting international investors looking to diversify away from China for years, and this trend is, without a doubt, speeding up amidst the current rivalry with the US (Financial Times, 2025).
Reassessment of supply chains have come from all sectors and businesses, as a way to try to mitigate this uncertainty, avoiding rising costs and thus, hedging risks. The tech industry in particular, has been decisive in its response. Rising as an optimal location outside China, the city of Chennai, for example, is becoming a key hub for global tech manufacturing, harbouring Apple and Samsung’s production, among many others (Priyadarshi, 2025).
There has been notable movement in the past weeks of Apple in particular, with the firm shifting its operations from China to India. This decisiveness came as a result of the company having been particularly hard-hit by the financial market sell-off that occurred after the tariff announcement. In just a week, the tech giant lost close to $700 billion in market value (Financial Times, 2025). Its response involved flying around 1.5 million iPhones from India to the US, after having boosted production there in efforts to sidestep Trump’s tariffs (Reuters, 2025). Indeed, Apple has made a not-so-discreet strategy to increase production in India, while the government, on its part, took advantage of its new role as Apple’s assembly hub by helping the company to clear customs quicker (Reuters, 2025).
This shift by Apple has been taking place slowly since the pandemic, because of the effect of strict Chinese restrictions on its supply chain (Financial Times, 2025). Since then, it has steadily built presence in India, which has added up to 5 assembly plants there currently. Other key apple suppliers have also been opening plants there in the last few months as a hedging tactic, and after taking into consideration India’s more conciliatory tone towards Trump than China. It seems very clear to these tech companies that India reaching a trade deal with US seems much more likely at the moment.
Economic outlook comparison
India’s economy is forecast to expand by 6.5% in 2025, supported by foreign investment as well as domestic consumption. Comparatively, China’s GDP growth was revised downward as a result of the trade war, from 4.9% to 4.5% (World Bank, 2025).
In addition, India’s currency, the rupee, rose to its best figure in a month. With a faltering dollar, it closed at 85.3675 per US dollar. In addition, foreign investors bought over $1 billion of Indian stocks in just two trading sessions, and its equity indexes logged their best weekly increase in more than 4 years (Kalra, 2025).
However, in the larger picture, and despite India’s progress economically, geopolitically and in trade, China’s economy is still larger than India’s and at the moment, continues to be the world’s most important manufacturing hub.
India’s manufacturing momentum
It aims to almost double its manufacturing sector’s contribution to GDP from 12% to 23% in the next 20 years (The Economic Times, 2025). To achieve this, and aside the shift in global manufacturing obviously gaining momentum because of Trump’s trade war with China, India’s government has implemented several policies over the last years which have been directed at growing this industry and competing with China (Priyadarshi, 2025).
One example is the Production Linked Incentive (PLI) scheme, launched in 2020 and intended to increase domestic manufacturing, its export sector and reduce import dependence. The Apple and Samsung relocations were partly driven by this policy, and it has brought over $12.5 billion in investments as of 2024 (Government of India, 2025). The “Make in India” subsidy scheme has been another successful policy, managing to double mobile phone production in the country, for instance (Financial Times, 2025).
Challenges to this shift
However, this shift in global manufacturing from China to India is not as straightforward as it seems. In reality, the move is costly and takes a lot of time, and many companies cannot afford it, more than they can afford the tariffs on Chinese imports. Furthermore, practical challenges persist. For example, for the previously mentioned tech companies, even if they move their assembly plants to India, they remain highly dependent on Chinese suppliers of key components, which would therefore still be subject to US tariffs (Financial Times, 2025). Other obstacles to shifting production to India include overcoming red tape and difficulty finding skilled workers, despite the country’s gigantic work force (Travelli & Kumar, 2025).
India-LATAM ties
In terms of trade, India has also been a target of diversifying trade relations as an attractive partner for many countries, once again as a tactic to hedge risks amidst geopolitical tensions between the US and China. For India, these developments are beneficial as they contribute to its pursuit of strategic autonomy.
In Latin America in particular, there are a lot of investment opportunities for India, with its top trade partners being Brazil, Mexico, Argentina, Colombia and Peru. Nevertheless, India is not yet as present in the region as China, but over the last decade, their trade has increased by 145%(Käufer, 2025).
In conclusion, with continued investment and government policies targeted at the Indian manufacturing sector, India can come close to catching up with China. However, China still secures the top place and given that the 145% tariff rate is unlikely to last more than a few months, India must continue to compete with China in attracting companies to its manufacturing industry and diversify its trade to match China’s power in the international arena.
References:
Financial Times. (2025, February 20). Apple expands India manufacturing. Financial Times. Retrieved from https://www.ft.com/content/35266a4f-e296-45c5-a578-df1fccda318e
Financial Times. (2025, April 15). Apple turns to India to help ease Trump’s China tariffs. Financial Times. Retrieved from https://www.ft.com/content/5c4b2bc9-f0ac-46f3-a93b-cfa6273428f9?sharetype=gift
Government of India. (2025). Production Linked Incentive Scheme (PLI) for White Goods. Ministry of Commerce and Industry, Department for Promotion of Industry and Internal Trade. Retrieved from https://dpiit.gov.in/production-linked-incentive-scheme/production-linked-incentive-scheme-pli-white-goods
Kalra, J. (2025, April 17). Inflows, faltering dollar help rupee log best week in a month. Reuters. Retrieved from https://www.reuters.com/markets/currencies/inflows-faltering-dollar-help-rupee-log-best-week-month-2025-04-17/
Käufer, T. (2025, February 26). India and Latin America tighten ties to diversify trade. DW. Retrieved from https://www.dw.com/en/india-and-latin-america-tighten-ties-to-diversify-trade/a-71746866
Kumar, V. (2025, April 22). Indian benchmarks log highest closing levels in nearly four months, financials lead charge. Reuters. Retrieved from https://www.reuters.com/world/india/indian-benchmarks-may-open-flat-banks-focus-after-rbis-liquidity-boost-2025-04-22/
Priyadarshi, K. (2025, April 7). From China to Chennai : How Trump’s Tariffs Are Shaping India’s Tech Manufacturing Future. Techovedas. Retrieved from https://techovedas.com/from-china-to-chennai-how-trumps-tariffs-are-shaping-indias-tech-manufacturing-future/#google_vignette
Reuters. (2025, April 10). Apple airlifts 600 tons of iPhones from India 'to beat' Trump tariffs, sources say. Reuters. Retrieved from https://www.reuters.com/technology/apple-airlifts-600-tons-iphones-india-to-beat-trump-tariffs-sources-say-2025-04-10/
The Economic Times. (2025, April 22). India aims to double share of manufacturing in GDP to 23 pc helped by sunrise sectors: FM. The Economic Times. Retrieved from https://economictimes.indiatimes.com/news/economy/policy/india-aims-to-double-share-of-manufacturing-in-gdp-to-23-pc-helped-by-sunrise-sectors-fm/articleshow/120524483.cms#goog_rewarded
Travelli, A., & Kumar, H. (2025, April 10). Trump’s Trade War With China Could Be Good for India. But Is It Ready? The New York Times. Retrieved from https://www.nytimes.com/2025/04/15/business/trump-tariffs-india-manufacturing.html
World Bank. (2025). Global Economic Prospects. A World Bank Group Flagship Report. Retrieved from https://openknowledge.worldbank.org/server/api/core/bitstreams/f983c12d-d43c-4e41-997e-252ec6b87dbd/content
Written by Laura Rebollo
