US-China Truce - Loss For India

DECODE THE NEWS

India’s US Export Dreams On Pause Amid US-China Tariff Truce

What

On May 12, China and the United States reached a temporary truce — the US slashed tariffs on Chinese goods from 145% to 30%, while China cut its tariffs from 125% to 10%, both for a 90-day window. The announcement came just 40 days after US president Donald Trump declared his 'Liberation Day' tariffs on April 2.

But this agreement between the world’s two largest economies might not be good news for India.

Why?

For weeks, Indian exporters had been buzzing with hope, expecting a windfall of US orders that would otherwise have gone to China, especially in sectors like textiles and hand tools. But with the tariff war cooling down, that opportunity seems to be slipping away.

"Initially, the tariffs were so high that there was barely room for worthwhile trade. The US market was practically shut for China, creating a reasonable opportunity for a portion of Chinese trade to shift to India. But now, with a 115% tariff reduction from both sides, the entire game changes," Mithilesh Thakur, secretary general of Apparel Export Promotion Council (AEPC), told The Core.

After the US imposed steep tariffs on China starting April 2, US buyers showed increased interest in Indian suppliers, especially in hand tools and pet clothing. Was this a golden opportunity for India?

“Let’s be realistic — India can’t absorb all of China’s lost market. Our current capacity simply isn’t enough. But this is a golden opportunity, especially in categories like educational and puzzle toys, where we’ve always done well. The focus must be on expanding our production base,” Ajay Sahai, chairman of the Federation of Indian Export Organisation, told The Core.

India has long aimed to benefit from the ‘China Plus One’ strategy, where companies diversify manufacturing beyond China. While there have been notable strides, India's overall success in this endeavour has been mixed, with challenges like labour shortage, infrastructure and capacity hindering its full potential.

In a world where India dreams of becoming the next big manufacturing hub, these challenges are more than just growing pains — they’re potential dealbreakers.

BUILD ON BLOCKCHAIN

Tokenise To Buy, Sell Piece-fully

In the last few weeks, we have talked about how blockchain technology could enhance security and transparency and how institutions like banks can use it to improve better customer experience.

But did you know that blockchain could make buying and selling assets of any kind much easier?

Take, for example, the case of flight tickets. Summer vacations are here, and you’re excited that the annual trip you take with your family to a cold destination is only a week away.

But suddenly, something unexpected and unavoidable comes up at work, and you realise this vacation will have to be canned. You’re disappointed.

It pinches you even more because the flight tickets you had booked months in advance are non-refundable, so you watch helplessly as your money goes down the drain.

But what if you could give away the ticket or sell it to someone who needs it, just like you would a concert pass?

Given the current rules and regulations, the idea might sound preposterous, but it’s possible with tokenisation (blockchain). This technology could change the way Indians do business, travel or transact in real estate.

And it can be used for more than just flight tickets. Blockchain can also be used bigger assets such as real estate.

This series is brought to you in partnership with Algorand. 

INDIA PAKISTAN CONFLICT

Pakistan on Tuesday claimed that India’s military action killed at least 50 people, including 40 civilians, Reuters reported. This comes even as India has maintained that it targeted Pakistan’s terror hubs and military bases.

While there is a ceasefire at the moment, Prime Minister Narendra Modi said on Monday that this was just a pause and India would be monitoring Pakistan’s actions. The Prime Minister also visited the Adampur airbase on Tuesday and heaped praise on the armed forces and reiterated India’s stance.

Flights: Air India and IndiGo cancelled flights to multiple cities on May 13, 2025, due to potential security or operational concerns. IndiGo has suspended services to Jammu, Amritsar, Chandigarh, Leh, Srinagar, and Rajkot.

Air India has also cancelled flights to eight cities, including Jammu, Leh, Jodhpur, Amritsar, Bhuj, Jamnagar, Chandigarh, and Rajkot, citing safety reasons. Passengers are advised to check flight statuses and contact airlines for rebooking or refunds.

Ships: No changes on Tuesday.

Airports: No changes on Tuesday.

Ports: No changes on Tuesday.

Cargo: No changes on Tuesday.

CORE NUMBER

855 million tonnes

This is the total cargo handled by India’s major ports in FY25 — a record high and a 4.3% increase over the previous year’s 819 million tonnes, according to the Ministry of Ports, Shipping and Waterways. The rise was led by higher cargo throughput in containers (up 10%), fertilizers (13%), and petroleum, oil and lubricants (3%). POL remained the largest category with 254.5 million tonnes, followed by container traffic (193.5 MT) and coal (186.6 MT). Containerised cargo alone has surged 70% over the past decade, from 7.9 million twenty-foot equivalent units (TEUs) in FY15 to 13.5 million TEUs in FY25.

—🔩💸 India Retaliates. India is considering putting tariffs on steel made in the US, as a response to the US’s tariffs on steel and aluminium, according to a document the country submitted to the World Trade Organisation (WTO) on Monday. In March, the US imposed a 25% duty on steel and aluminium, which India said would affect $7.6 billion worth of Indian exports. This comes at a time when the US and India are negotiating a free trade deal, and the Global Trade Research Initiative (GTRI) said India is open to negotiating on these proposed tariffs with the US. India’s trade minister, Piyush Goyal, is expected to visit the US again this week, Bloomberg reported, to hold talks on the bilateral trade deal.

—🇮🇳🥦 Retail Inflation Cools. India’s retail inflation eased to a six-year low of 3.16% in April, down from 3.34% in March, thanks to cooling food prices. Food inflation — which makes up nearly half the Consumer Price Index (CPI) —slowed to 1.78% in April, compared to 2.69% in March. The CPI peaked in October 2024 at 6.21%, with consumer food price inflation (CFPI) hitting 10.87% in the same month. This sustained moderation supports expectations of a 25-bps rate cut by India’s central bank, the Reserve Bank of India, in June, economists said. April also marks the third consecutive month inflation stayed below the central bank’s 4% target.

—🤝🏻 US-China Duty Drama! The US-China trade route just took another twist. The US will slash the de minimis tariff on Chinese shipments from 120% to 54%, with a $100 flat fee, starting May 14, following trade talks in Geneva. This move impacts companies like Shein and Temu, forcing them to rethink their strategies. A China-US deal to slash tariffs is set to push freight rates higher, with rates rising from $2,000 to $2,500 per forty-foot container. Meanwhile, China lifted its month-long Boeing delivery ban, allowing airlines to resume receiving US-made planes—on Beijing's terms.

—💸  Credit Crunch. India's micro, small, and medium enterprises (MSMEs) have for long said that they struggled to get credit, and now a report by the Small Industries Development Bank of India (SIDBI) has brought back the spotlight on this issue. The SIDBI report said that while credit supply had improved, there still remained a gap of about 24% or Rs 30 lakh crore. This was wider for women-owned MSMEs at 35% and also for the services sector at 27%. Despite this, the report said that women entrepreneurship had become a "significant aspect in the MSME sector with 26.2% in proprietary enterprises being owned by women".

PODCAST

On Episode 580 of The Core Report, financial journalist Govindraj Ethiraj talks to Ajay Srivastava, Founder of the Global Trade Research Initiative, Chetna Gala Sinha, Founder and Chair at Mann Deshi Bank & Mann Deshi Foundation as well as AVM GP Sharma, President (Meteorology & Climate Change) at Skymet Weather.

• The markets reverse some of the post ceasefire gains

• Inflation hits a 6 year low of 3.16%

• What happens to India' s China + 1 plans?

• Decoding the arrival of the rains and monsoon 2025, the early forecasts 

• Build On Blockchain: Why women entrepreneurs find it tough to get loans

👥 THE TEAM

✍️ Zinal Dedhia, Salman SH, Kudrat Wadhwa | ✂️ Rohini Chatterji | 🎧 Joshua Thomas