India-US deal isn't just a trade deal. It adds muscle to India's China fight

US President Donald Trump's announcement of the finalisation of a broad trade agreement with India is more than Indian exports facing fewer tariffs in America. This is how it boosts India's prospects as it competes with China in manufacturing, exports and strategic weight.

President Donald Trump on Monday (February 2), said he and Prime Minister Narendra Modi agreed on a broad India-US trade agreement. The announcement of the trade pact by Trump, which ends months of tensions, will boost Indian exports. It would position Delhi as a key alternative to China in global supply chains. In effect, the deal, after coming into effect, would prove to be a booster shot for India, which is competing with China in its manufacturing and commercial space, say experts. Beyond just being a trade deal, the India-US FTA will give India a strategic edge, especially against China. US Vice President JD Vance earlier said that the deal "aims to rebalance global trade".

Washington has long held that global trade has been tilted towards China. As Vance said during his India visit in April 2025, "India and the US finalising the terms of references for the trade deal is a vital step and sets a roadmap for the final deal".

The announcement of the agreement, which slashed tariffs on Indian exports to the US down to 18% from 50%, is lower than rates on competitors. China continues to face tariffs of 47%, while Pakistan and Bangladesh are at 20%, and Vietnam and Indonesia hover around 19-20%.

While the 18% US tariff cut will translate into immediate gains for Indian exports, the follow-up deal is expected to further position India as a strong manufacturing and exporting hub, especially as it is also slated to ink a free trade agreement with another major trading partner, the European Union in 2026, and it will be operational by 2027.

The potential deal also revives the 'China-Plus-One' strategy, which is a business approach where companies diversify their manufacturing and supply chains away from sole dependency on China by expanding operations into other countries. And China's counterweight, India, is an attractive investment destination for companies looking for a safe bet.

Entrepreneur and scholar at Takshashila Institute, Yusuf Unjhawala, said, "For export to the US, with the trade deal, India's tariff is at 18%. China's effective tariff rate is 47.5%. If this holds for a good period of time, India will benefit in multiple sectors".