India Pulls Ahead Of Rivals As Trump’s Trade War Shakes Markets
ThomasAs US President Donald Trump shocks markets and governments with his trade war, few countries are weathering the turbulence better than India, both politically and economically.
The South Asian nation is well-positioned to withstand ruptures to global trade. When Washington announced its harshest levies yet on dozens of countries this month, India was insulated from the ripple effects by its relatively small export base. Trump’s proposed tariff on Indian goods — 26% — was also far lower than those imposed on manufacturing rivals in Southeast Asia, like Vietnam, where the threat of a 46% import tax fueled panic through factories making products for American buyers.
As the US and other large economies stare at recessions, India’s economy is still expected to grow more than 6% — slower than last year, but still the fastest of other major nations, buffered in part by its massive domestic market of 1.4 billion people. The US has prioritized India in its trade negotiations, with Vice President JD Vance touching down in New Delhi this week, where he met with Prime Minister Narendra Modi.
More broadly, as ties continue to fray between Washington and Beijing, India is using its relative strength to cast itself anew as the natural alternative for capital once bound for China — the next “factory to the world” and an emerging superpower that wants to play more of a role as global king-maker under Modi.
“That’s why we respect him,” Vance said on Tuesday. “He stands strong for India’s interests.”
That confidence reflects in India’s markets. Stocks and the rupee closed on Tuesday at their strongest level of 2025, and benchmark 10-year yields have hit a fresh three-year low. Last week, the benchmark NSE Nifty 50 Index erased all losses triggered by Trump’s announcement of so-called reciprocal tariffs, making India the first major stock market to recover — even if some of the rosiness is partly because a decline in share prices had taken place before Trump set off a slump in global equities in February.
Rahul Saraf, Citigroup Inc.’s head of investment banking in India, called the country “uniquely resilient” to the macro shocks of a new world order under Trump, pointing to the fairly unlevered balance sheets of local companies and a profusion of money with private equity firms and sovereign wealth funds ready to fund deals.
Over the past few weeks, as the trade war ripped at the seams of supply chains, India has already tried to pick up the pieces. Air India Ltd. is considering acquiring Boeing Co. planes rejected by Chinese carriers, according to people familiar with the matter. Alphabet Inc. is discussing shifting some of its global production of Google Pixel smartphones to India from Vietnam. And UBS Group AG is transferring its onshore wealth management to India’s 360 One WAM Ltd., a significant boost for the Swiss bank’s exposure in Asia.
For now, officials in the US and India also seem willing to overlook some of their historical differences, united by a desire to pull together as a check on Chinese dominance in the region. Modi and Trump have long enjoyed cordial personal ties, and the return of the Trump administration came as welcome news across much of New Delhi following the US leader’s defeat of Joe Biden in November.
Many in India’s government see in Trump a leader who would be easier to work with — less critical of India’s close ties with Russian President Vladimir Putin, and less demanding of accountability for its alleged involvement in extra-judicial killings of overseas activists.
“The strong relationship between India and the US cuts across all party lines,” said Manoranjan Sharma, chief economist of Infomerics Ratings. “Now that the US wants to distance itself from China, it’s natural that it will choose India as a partner.”
Months before the rollout of Trump’s levies, Modi’s tax bureaucracy was hard at work cutting tariffs on American bourbon, chemicals and cars. And unlike countries like Colombia, which responded with fury at the Trump administration’s deportations of undocumented migrants in shackles, India said it was the duty of all countries to combat illegal migration and accepted plane-loads of its migrants without complaint.
In a White House where getting meetings with the president and his top deputies is proving tricky for many world leaders, India has faced less pushback. Modi was among the first foreign leaders to visit Trump in February, when the two sides agreed to strike the first tranche of a bilateral trade deal by the fall. India is on a short list of countries the US is prioritizing negotiations with during Trump’s 90-day tariff pause, which ends in July.
Trump officials say the negotiations — which includes tariffs, but also Indian purchases of defense equipment and energy from the US — will be tough, and it’s unclear yet whether an agreement would allow India to escape the reciprocal duties.
However, Vance signaled this week that both sides had made “significant progress” toward the trade deal, with the broad outlines of a roadmap in place for further discussions.
Vance’s four-day trip — the first by a US vice president in over a decade — included dinner with Modi, touring Jaipur’s ancient sandstone forts with his family and visiting a sacred Hindu temple outside New Delhi. Days before his meeting with the vice president, Modi said he spoke with Trump aide and Tesla Inc. chief Elon Musk about potential areas of collaboration. If all goes to plan, Trump will also touch down in India in the coming months.
Even so, Trump 2.0 has been defined, at least so far, by its unpredictability. In the longer term, whether India succeeds in luring more business away from competitors will depend, partly, on how it plays its cards with the US. On the campaign trail in his first term, Trump frequently criticized India, calling it the “tariff king” and complaining that high trade barriers made it difficult for American companies like Harley-Davidson Inc. to do business on the subcontinent.
Arup Raha, the chief economist for Asia Pacific at Oxford Economics, cautioned against reading too much into the tea leaves. India’s historical weaknesses in manufacturing — whether from tough labor laws or paralyzing bureaucracy — mean that it’s unlikely to replace China as a manufacturing hub in the near-term.
Still, India has the right mix of strengths to make it a real player in today’s multipolar world, Raha said. In any case, there aren’t many better options out there.
“If you are looking for a large ally, that’s India,” he said.
