Impact of US-China tariff deal

The recent US-China trade deal has significantly reduced the tariff gap between India and China, potentially impacting India's competitive edge in attracting companies looking to relocate from China.According to Ajay Srivastava, Founder of the Global Trade Research Initiative, the US-China agreement to withdraw reciprocal tariffs for 90 days has brought tariffs closer to parity, undermining the "China Plus One" strategy that benefited India.

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The 'China Plus One strategy typically involves companies diversifying their investments to countries other than China."Now, that edge has narrowed dramatically, with the US and China easing tensions and bringing tariffs closer to parity," Srivastava said in a note. For global investors, he said the message is clear: "Washington is re-engaging with Beijing."

On Monday, the US and China arrived at an agreement that they will withdraw their previously announced reciprocal tariffs and counter tariffs for an initial period of 90 days. This drastically eased the spiralling trade tensions between the two major trade partners. As part of the understanding, China will reduce tariffs on US goods from 125 per cent to 10 per cent, and the US proposes to cut tariffs on Chinese goods from 145 per cent to 30 per cent. Just weeks ago, the US administration at one point vowed to slap 245 per cent duties on Chinese goods.