145% on China, 90 days for India: The clock’s ticking on PM Modi’s make-or-break moment

When President Donald Trump imposed a 27% tariff on most Indian exports to the United States, there was anxiety in New Delhi. But there was also calculation.

India’s business leaders and government officials saw something more than just a slap on the wrist. They saw an opening. China, India's biggest economic rival, was hit far harder. Vietnam, too. And when Trump doubled down, lifting the tariff on Chinese goods to a whopping 145%, India’s prospects began to look even brighter.

"This is a significant opportunity for India's trade and industry," said Praveen Khandelwal, a member of Parliament from Bharatiya Janata Party, speaking to The New York Times. Khandelwal is also a prominent voice in India’s business lobby.

For years, India has sought to become a manufacturing alternative to China. Modi’s “Make in India” campaign, launched in 2014, promised to transform the country into a global factory floor. But while the slogans sounded grand, India’s supply chains tell a messier story.

Foxconn, iPhones and Made-in-India dreams

There have been some wins. Apple’s Taiwanese supplier Foxconn has begun producing iPhones in Tamil Nadu, gradually shifting some of its China-based operations to India. According to one person involved in the Apple supply chain, production in India may soon account for 30% of global iPhones, a significant jump from near zero just a few years ago.

That’s not all. In the weeks leading up to Trump's 27% tariff announcement, electronics shipments from Tamil Nadu's main airport doubled, rising to over 2,000 tonnes a month. Apple and others had clearly begun to hedge their bets.

But beneath the headline successes lies a more sobering truth.

Despite a decade of industrial policy and more than $26 billion in government incentives, India’s manufacturing sector has shrunk in proportion to the broader economy — now accounting for less than 13% of GDP, down from 15% a decade ago. In contrast, manufacturing contributes roughly 25% of GDP in many East Asian economies.

India had initially promised 100 million new manufacturing jobs by 2022. That goal now looks far out of reach.

Inside India’s Factories: Bright lights, imported parts

Just an hour’s drive from New Delhi, the Rai Industrial Estate in Haryana tells a revealing story. In 2019, Vikram Bathla founded LiKraft, a battery manufacturer. His 300 workers, mostly migrants from poorer Indian states, carefully assemble lithium-ion batteries under bright fluorescent lights.

But look closely: the battery cells are marked “Made in Inner Mongolia”. The larger welding machines? Chinese. The supply chain? Still foreign.

“We can buy the equipment, and we do,” Bathla told The New York Times. “What we don’t have is the skilled workers to use it.”

In five years, Bathla says, he’s still trying to catch up with competitors who had a 15-year head start.

Down the road, AutoKame, which makes car-seat covers, faces similar constraints. The firm imports robotic cutters from Germany and Italy, and relies on imported synthetic fibres.

The result? “Made in India” often means assembled in India, with parts from somewhere else.

The Stubborn Barriers: Land, lawyers, and loops of red tape

India’s manufacturing woes go beyond technology and training.

Anil Bhardwaj, head of a manufacturing trade organisation, points to deep-rooted issues: high land costs, lack of specialised engineers, unreliable bank financing, and government flip-flops that create uncertainty for investors.

But Bhardwaj also highlights a more unusual bottleneck: the court system. "That's why people really fear the big companies in India," he said.

With more than 50 million cases pending, India's sluggish judiciary leaves small businesses vulnerable. Challenging powerful corporations — or their political allies — can spell ruin. So many small firms deliberately avoid expanding, wary of being dragged into legal hell.

Progress is real, Bhardwaj concedes. Electricity is now far more available than a decade ago. Modi’s digital reforms have eased some business procedures. But the fundamentals remain brittle.

Even as it aligns more closely with the US, India remains tightly enmeshed in Chinese supply chains. About 40% of Vietnam’s imports come from China—a figure mirrored in India’s dependence on Chinese electronics and machinery.

Now, New Delhi sees a fresh opening: stepping into the gap left by Chinese e-commerce exporters as Washington imposes tariffs of over 120% on low-value shipments from China starting in May.

A report by the Delhi-based think tank GTRI calls it a “massive opportunity” for Indian small businesses, handicraft exporters, and fashion sellers—if the government can cut through the red tape.

America’s Gamble: Can India replace China?

As tensions between Washington and Beijing escalate, some US policymakers see India as the strategic swing partner in a new anti-China coalition. According to Bloomberg, Trump’s Treasury Secretary Scott Bessent has floated a “grand encirclement” plan, aimed at building economic alliances with India, Japan, Vietnam, and South Korea to isolate China.

“They’ve been good military allies, not perfect economic allies. At the end of the day, we can probably reach an agreement with them,” Bessent said.

India fits this vision neatly. It has a massive market, a fraught relationship with China, and a desire to be seen as a global leader. Its decision to shut out Chinese tech firms like BYD, while welcoming US giants such as Tesla, signals a deliberate pivot.

Trump’s 90-day tariff reprieve to countries like India is part of the playbook. The idea: reward countries that align with US trade goals, block Chinese transshipments, and buy American goods. In return, they avoid punishing US tariffs.

But is New Delhi really ready?

Boeing, Beijing, and the Backlash

The deeper fallout from Trump’s trade war is being felt elsewhere. In a retaliatory move, Beijing instructed Chinese airlines to halt new orders from Boeing, its largest aircraft supplier. The move stunned observers, especially as China was projected to buy nearly 9,000 Boeing jets over the next two decades. India, by comparison, is expected to order just 2,400.

The message from China was clear: it is willing to bear the pain of disruption, even in aviation, to bolster its domestic manufacturer, COMAC. Meanwhile, critics in the US say Trump’s chaotic tariff regime — with carve-outs for some sectors and abrupt reversals for others — reeks of cronyism.

One meme, widely shared on Chinese social media, shows Trump declaring “I hold the cards”, with Xi responding: “The cards are made in China.”

Red lines and red faces

Back in the US, liberal commentators are openly questioning whether Trump is outmanoeuvring Beijing — or simply flailing.

“What if you get into a trade war with China and you lose?” asked Ezra Klein, a liberal podcaster. “What if... you make China look stronger, more reliable, more strategic in the eyes of all these other countries?”

Trump’s apparent indecision — first withholding pharmaceutical tariffs, then suggesting he may reinstate them — has frustrated even his own base. His move to exempt automakers from certain tariffs has led to allegations of insider dealing. The $42 billion US toy industry, heavily reliant on China, is also lobbying hard for exemptions.

As Trump himself put it, “I don’t change my mind. I’m just a very flexible person.”

The Moment is here. But can India seize it?

India’s moment, it seems, has arrived. Trump’s punishing tariffs on China have reshuffled global supply chains. Western companies are looking to diversify. Diplomatically, New Delhi is being courted. Strategically, it is vital.

But the question remains: can India deliver?

Its vast potential is undeniable. But the same hurdles — lack of skilled workers, fragile infrastructure, legal quagmires, and policy unpredictability — still loom large.

If India wants to become the factory of the world, it will need more than favourable tariffs and bold headlines. It needs to fix the factory floor. And fast.

(With inputs from NYT)