The US-China trade deal has witnessed yet another development, with both nations reducing the tariffs imposed on each other to 115 percentage points, creating new challenges for negotiators in other countries, especially India. As per the deal, the US tariff imposed on Chinese imports would be reduced from 145% to 30%, while China’s tariff imposed on the US would be down from 125% to 10%, creating a 90-day timeline to collaborate on a broader agreement.
This 90-day truce is expected to provide the US and China a pause on their trade war, while carrying opportunities and challenges at the same time. The Indian metal stocks, along with pharmaceutical APIs, engineering goods, and the IT sector and services, are expected to witness a boost. However, some analysts see the improved trade tariffs between the US and China as an opportunity for the former to return to the latter’s products and services, indicating a significant US-China trade impact on Indian stocks.
US-China Trade Relations: Exploring the Existing Dynamics
The trade relationship between the US and China from 2022 to 2025 has been marked by significant volatility despite the US remaining China’s largest export destination. Chinese exports to the US experienced a sharp decline from $154 billion in the second quarter of 2022 to $111.82 billion in the first quarter of 2023. This was followed by a rebound to $143.02 billion by the fourth quarter of 2024, which declined again in early 2025.
A major factor behind this volatility is the impact of US tariffs and ongoing trade tensions. The tariffs imposed by the US have increased the cost of Chinese goods, reducing their competitiveness and demand in the American market. The US tariffs have not only affected bilateral trade but have also contributed to reshaping global trade patterns, influencing trade tensions and stocks, pushing China to strengthen ties with emerging economies, and adapt to a changing geopolitical environment.
US-India-China Trade Relations: An Overview
The US has remained India’s largest trading partner for four years in a row, and recorded a trade surplus of $41.18 billion, highlighting a strong economic partnership, given the exports of pharmaceuticals, telecom instruments, and precious stones. The surplus proves India’s presence as one of the major players in the export value chain, benefiting from favourable market access and robust demand in the US and boosting the Indian equity market.
China, on the other hand, remains India’s second-largest trading partner, with two-way trade at $127.7 billion. India’s trade deficit with China hit a record $99.2 billion, as imports surged and exports fell by 14.5% to $14.25 billion. The deficit pushes India to restrict its dependence on Chinese goods, particularly electronics, consumer durables, and machinery, making it look for ways to drive domestic capacity.
While India is building a mutually beneficial partnership with the US, exporting high-value goods and enjoying a surplus, it faces a structural deficit with China, importing much more than it exports.
US-China Current Status: A Red Flag or an Opportunity for India?
Easing tariffs could revive US-China trade flows, but it could also potentially sideline the Indian exports that benefited from earlier trade tensions. Experts highlight that increased competition from Chinese goods in the US market may narrow the tariff advantage Indian exporters previously enjoyed, making it harder for India to expand its shares in sectors like textiles and engineering. However, the situation is not entirely a red flag, and hence, the global trade and Indian stocks still seem on the safer side.
India still retains a tariff edge, and the global trend of diversifying supply chains away from China continues to offer India a strategic opportunity. By leveraging its strengths in manufacturing and negotiating favourable trade terms with the US, India can position itself as a resilient alternative in global supply chains, turning the evolving US-China dynamic into a long-term opportunity.
Investment Insights on US-China Trade: What’s in Store for Indian Investors?
The US-China trade tensions are causing global supply chain diversification, creating a significant opportunity for Indian investors amid the US-China trade impact on Indian stocks. As multinationals seek alternatives to China, India stands out due to its scale, improving infrastructure, and business-friendly reforms.
According to analysts, even if China’s aces could set up in the US, national security concerns may restrict their expansion, further boosting India’s appeal as a manufacturing hub. This global rebalancing positions India as a stable emerging market and a likely major beneficiary of shifting investment flows. India’s emergence as a preferred alternative to China in global supply chains, accelerated by US-China trade tensions, presents compelling opportunities for investors.
The following points mention the Indian stock market impact due to the latest US-China trade deal developments:
- Multinational companies are actively diversifying away from China towards India’s improving infrastructure and pro-investment reforms, making it a prime destination for capital inflows.
- Sectors such as electronics, automotive, pharmaceuticals, green energy, and textiles are witnessing a surge in both domestic and foreign investments due to government initiatives like the Production-Linked Incentive (PLI) schemes.
- Foreign Direct Investment (FDI) in manufacturing is projected to cross $100 billion by 2025, facilitating growth in smart manufacturing, automation, and sustainability.
Conclusion
India faces a few trade-related pressures from the US, while China remains entangled in a prolonged trade war and is less likely to meet US demands. Disappointing Chinese retail sales and a reliance on manufacturing-driven exports signal underlying economic weaknesses in China. In contrast, India’s stable macro environment and fewer geopolitical frictions make it more attractive to global investors seeking growth and relative safety. Overall, India offers better prospects than China in the current climate.
