India's Strategy for Trade Should Converge Its US and China Tracks

A US-China trade pact should prompt us to reshape our GVC strategy with both partners in mind

- VIVAN SHARAN & DEEP PAL

The US and China have reportedly finalized a trade pact that reduces tariffs and restarts critical rare-earth flows as part of a broader effort by US President Donald Trump and Chinese President Xi Jinping to reset bilateral trade ties. Meanwhile, Washington is negotiating up to ten additional deals ahead of the July 9 deadline for Trump's tariffs to kick in, placing Japan and India near the list's top.

US-China ties matter greatly to New Delhi, which runs two distinct relationships with them. It leans on Chinese intermediate goods, especially in industries such as electronics and pharma, yet blocks deeper inflows of Chinese capital and expertise to its market. By contrast, India relies on steady market access to US consumers, chiefly for its services and talent, yet is considering digital service regulations that may make US reciprocity less forthcoming.

Understanding how India fits into global production networks helps clarify the strategic trade-offs we face with both China and the US. Global Value Chains (GVCs) span every step from design to delivery of both goods and services. Three decades of globalization stretched GVCs across numerous countries. Each smartphone, for instance, requires hundreds of components sourced from various corners of the planet. The best designs come from the US, best lithography equipment from the Netherlands, best semiconductors from Taiwan, best displays from South Korea and so on.