India's narrow path to victory in US-China trade war

India currently finds itself caught between the world's two global superpowers. The Asian economic titan faces 50% tariffs on the majority of its exports to the United States, yet it also has to contend with a severely unbalanced trade relationship with China.

- Manishi Raychaudhuri

Navigating this path will prove tricky, but the upshot could be a stronger Indian industrial base.

The tariffs imposed by US President Donald Trump's administration were a shock to India, not only because of the prohibitively high rate, but also because most other trading partners got off relatively lightly, with only 15% to 20% duties.

Many of those nations compete with India in the US market, and thus will now have a significant competitive advantage.

The industries that could suffer most include textiles, apparel, leather goods and gems and jewellery. India's main competitors in these areas - Bangladesh and Vietnam in textiles and garments, and Turkey, Thailand and Vietnam in gems and jewellery - all face far lower tariffs.

While exports from these now-heavily tar-iffed industries may only represent about 1.4% of the country's GDP, these sectors account for a disproportionately high percentage of India's labour market.

In fact, these sectors employ about 55 million workers, almost a fifth of India's urban workforce, according to the government's Press Information Bureau and the India Brand Equity Foundation.

It is, of course, still early days in the tariff turmoil, but some large Indian employers are already painting a disquieting picture, noting US order cancellations and possible worker retrenchments.

These tariffs could therefore pack a big economic punch, especially at a time when urban consumption is already weak.