How Trump vs China Trade War Fallout Has Dealt A Blow To 'Make In India'

As Donald Trump prepares for a potential return to the presidency on January 20, tensions between the United States and China are escalating. Beijing has already taken precautionary steps, signaling that it will not hesitate to retaliate in the looming trade war. This development has not only rattled Washington but has also indirectly dealt a significant blow to India's ambitious "Make in India" initiative.

Impact on India's Key Sectors

Under the "Make in India" program, the country has witnessed remarkable growth in industries such as solar power, electronics, mobile manufacturing, and electric vehicles (EVs). These sectors, however, are heavily reliant on raw materials, components, and machinery supplied by China.

China's recent export restrictions have disrupted the supply chain for Indian manufacturers, creating bottlenecks and delays in production. These measures have targeted critical materials like rare earth minerals and high-tech machinery essential for solar panels, mobile devices, and EV batteries.

China's Strategic Moves

In December 2024, China banned the export of gallium and germanium, vital for solar cell production. Shortly after, it prohibited the export of antimony, a key material for semiconductors and defense technologies. Most recently, Beijing added lithium extraction and battery cathode technologies—crucial for EV batteries—to its controlled export list.

While these restrictions were primarily aimed at the US, their ripple effects have been felt in India. The curbs extend to countries that use these materials to manufacture goods destined for American markets, further complicating the global supply chain.

India's Dependence on China

Despite efforts to diversify, India remains significantly reliant on Chinese imports. The country’s imports from China rose to $101.73 billion in 2023-24, up from $98.5 billion in the previous fiscal year. The economic think-tank GTRI highlighted that India’s electronics, solar, and EV sectors are particularly vulnerable to these disruptions.

"Indian firms in these sectors are facing major delays as China blocks exports of inputs and machinery," GTRI founder Ajay Srivastava stated. "This also signals deeper geopolitical tensions and trade war. We hope India-specific restrictions go away soon as they will also hurt China," he added.

A Double-Edged Sword

China’s actions could backfire as Beijing’s export restrictions coincide with its displeasure over India’s stringent policies. In 2020, following the Galwan Valley clash, the Indian government introduced measures requiring countries sharing land borders with India to seek approval for investments. These steps, aimed at safeguarding national security, have contributed to strained relations with China.

A Geopolitical Tightrope

As the US and China lock horns, India finds itself walking a geopolitical tightrope. On one hand, it seeks to capitalize on opportunities to reduce Western dependence on Chinese manufacturing. On the other, it must address vulnerabilities in its own supply chains to ensure the success of the "Make in India" initiative.

China’s latest moves serve as a reminder of the interconnectedness of global trade and the challenges of navigating a rapidly shifting geopolitical landscape. For India, building resilience and reducing dependency on a single source of imports will be key to weathering the storm.