As Trump’s fresh threats loom, India still has a slight tariff edge over China but loses advantage with Vietnam

By | August 6, 2025
India tariff advantage over China at risk due to Vietnam's export rise

As former U.S. President Donald Trump eyes a return to the White House in 2025, his renewed threats of aggressive trade policies are shaking up global supply chains. India finds itself in a tricky position. While it retains a slight tariff edge over China, it’s rapidly losing ground to Vietnam—a rising star in Southeast Asia.

This shift highlights India’s delicate balancing act. It must stay ahead of China in the race for Western partnerships and simultaneously fend off Vietnam’s increasing appeal to global manufacturers.

Trump’s “America First” Agenda Returns

Donald Trump has indicated plans to double down on protectionist policies. His latest pitch includes a universal 10% tariff on all imports, with even higher rates likely for Chinese goods. The tone is familiar, echoing his trade stance during his first term, which often unsettled U.S. allies and adversaries alike.

While this poses challenges for many countries, it also opens doors. Nations like India could benefit from global supply chain realignment—if they act quickly and wisely.

India Still Has a Tariff Advantage—But It’s Not Guaranteed

At present, India enjoys lower U.S. tariffs on several goods compared to China. Products like textiles, pharmaceuticals, and software services are key beneficiaries. These favorable trade terms, along with geopolitical tensions involving China, have positioned India as a promising alternative.

However, this edge is narrower than it seems. Vietnam has outpaced India in export volume growth, particularly in electronics, garments, and furniture. Its seamless integration into regional supply chains gives it a distinct advantage.

Why Vietnam Is Surging Ahead

Vietnam’s rise is driven by smart policy and swift execution. The country has signed over a dozen free trade agreements. Notably, it is part of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and has a bilateral deal with the European Union.

Foreign companies are taking note. Firms like Apple, Samsung, and Intel have moved parts of their supply chains to Vietnam. These shifts are helping Vietnam capture a growing share of U.S. and European trade.

Meanwhile, India faces persistent roadblocks. These include bureaucratic delays, inconsistent infrastructure, and a complex regulatory landscape. While initiatives like Make in India and PLI (Production-Linked Incentives) exist, their impact has been uneven.

What’s at Stake for India?

If Trump’s proposed tariffs become reality, countries like India must be ready. Hesitation could mean missed opportunities. India needs urgent reforms to remain competitive.

Key focus areas include:

  • Streamlining customs processes
  • Improving port and logistics infrastructure
  • Expanding bilateral trade agreements
  • Enhancing the ease of doing business

Another area needing attention is export diversification. India still relies heavily on low-margin sectors. Vietnam, in contrast, emphasizes high-value products like electronics and machinery.

Geopolitical Context: A Window for India

Strategic tensions between China and the West are pushing global firms to diversify supply chains. India, as the world’s largest democracy and a fast-growing economy, fits the narrative of a trusted alternative.

However, theoretical potential is not enough. Vietnam continues to attract more targeted foreign direct investment, especially in technology and electronics. India must convert its demographic and economic advantages into real outcomes.

Time Is Running Out

The next 12 to 18 months will be critical. If Trump returns to office, uncertainty will surge. India could initially benefit from a tariff-driven shift away from China. But unless it’s fully prepared, Vietnam may continue to grab the lion’s share of redirected investments.

Even under a second Biden term, the U.S. is likely to continue reducing dependence on Chinese imports. This bipartisan push means the competitive pressure on India is here to stay.

Conclusion

India may still hold a tariff advantage over China, but that position is fragile. Vietnam is moving fast, with policies and partnerships that make it a strong contender for the world’s manufacturing investments.

To maintain its place in the global supply chain, India must act now. Strategic reforms, faster execution, and smarter trade negotiations are essential. Otherwise, it risks not just falling behind China, but also being outpaced by smaller, more agile economies like Vietnam.