Other BriefingsIndia Must Avoid Trade Shortcuts Amid US-China Tariff Tensions: GTRI
With the US imposing steep tariffs of up to 245 percent on Chinese imports, countries such as India appear poised to benefit—provided exporters navigate the shifting trade landscape with care.
According to a report by the Global Trade Research Initiative (GTRI), released on April 21, 2025, domestic exporters are urged to approach the trade opportunity with strategic foresight and strict adherence to trade regulations.
While India currently enjoys a lower tariff rate of 10 percent on exports to the US—at least until July 8, 2025—the GTRI report titled “Tariffs, Traps & Trade Paths” highlights significant compliance risks. The potential to fill the gap left by China could be derailed by missteps such as origin misclassification, illegal rerouting, and dumping.
On April 3, 2025 (IST, 1:30 AM), the US announced reciprocal tariffs on over 180 countries, including a 10 percent universal tariff on all imports, effective April 5, 2025. While India faced a reciprocal tariff of 26 percent, on April 9, the US president announced a 90-day halt on it, with the base tariff to continue.
Weighing trade opportunities along with potential risks
According to GTRI, customs infractions could invite serious penalties under US trade laws, which are now under tighter scrutiny post April 3, 2025. The report urges exporters to avoid shipment and customs shortcuts and instead focus on legitimate, rule-compliant trade practices.
ALSO READ: Indian Exporters Offset Trump Tariffs Using US FTZ.
One of the report’s key warnings involves attempts to reroute Chinese goods through third countries like India or Vietnam to avoid tariffs. GTRI clarifies that this strategy is not only risky but also illegal under US customs regulations.
The US evaluates whether a product has genuinely changed through the manufacturing process. If no substantial transformation has occurred, even products assembled outside China can be treated as Chinese-origin goods—and taxed accordingly.
To qualify for favorable tariff treatment, exported goods are required to undergo what is defined by US authorities as “substantial transformation.” It involves the addition of value through integration, design, software development, or similar processes. Mere assembly or repackaging is considered insufficient to meet this standard.
It is emphasized by GTRI that genuine manufacturing transformation is essential—not only for regulatory compliance but also for establishing a long-term sustainable export model.
India’s strategic position as an exporter amid shifting global trade dynamics
The report suggests that long-term success lies in establishing robust manufacturing hubs outside China. Countries like India, Vietnam, and Mexico are attracting global firms looking to diversify their supply chains.
India is well-positioned to capitalize on evolving global trade patterns, with several key sectors showing strong potential. Areas such as pharmaceuticals, active pharmaceutical ingredients (APIs), electrical equipment, textiles, leather goods, toys, and chemicals stand out as top contenders.
For instance, the domestic pharmaceutical sector has continued on an upward trajectory in 2025. According to the Ministry of Commerce and Industry, India’s drugs and pharmaceuticals exports increased by 9.39 percent from US$27.85 billion in FY 2023-24 to US$30.47 billion in FY 2024-25. This consistent growth highlights India’s growing reputation as a reliable source of generic drugs and essential medicines, especially as global healthcare supply chains undergo realignment.
Similarly, electronics exports have also seen a substantial increase. India’s electronic exports increased by 32.47 percent from US$29.12 billion in FY 2023-24 to US$38.58 billion in FY 2024-25. The export figures notably reflect both rising international demand and India’s expanding capacity in mid-tech, high-volume manufacturing—precisely the kind of supply chain alternative the US is now seeking.
India stands to gain if it maintains compliance and transparency. GTRI advises Indian exporters to take a proactive approach, such as the following:
- Closely track global supply chains
- Maintain comprehensive documentation for goods exports
- Seek binding rulings from the US Customs to avoid future disputes.
Conclusion
GTRI’s observations and suggestions underline that the opportunities arising from the US-China trade rift are real for Indian exporters. However, the report highlights that those who invest in genuine manufacturing capabilities, understand international trade regulations, and build transparent, compliant supply chains will enjoy lasting benefits.
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