US-China trade war 2.0: How does it impact India?
In 2025, a renewed trade dispute between the U.S. and China is shaking global markets, impacting economies like India. The introduction of tariffs has already led to significant losses in Indian stock markets, raising concerns for businesses and consumers alike.
It’s Happening Again
It’s 2025, and we are back to hearing about tariffs, trade wars, and stock markets crashing. The United States and China—two of the world’s biggest economies—are once again caught in a heated trade dispute. If this sounds familiar, that’s because it is. We saw something very similar between 2018 and 2020.
At that time, the trade war shook up global markets, hit businesses hard, and created all sorts of uncertainties. India wasn’t spared either. Now, it’s happening again, and investors, businesses, and even ordinary people are starting to worry. In just two days after the new tariffs were announced, Indian stock markets lost $180 billion in value. It’s clear that this is not just a fight between the U.S. and China—this affects all of us.
Let’s break it down in simple terms—what happened then, what’s happening now, and why it matters to India.
Looking Back: What Went Down in 2018–2020
In 2018, the U.S., under President Donald Trump, decided to get tough on China. The U.S. accused China of unfair trade practices and imposed tariffs (extra taxes) on goods being imported from China. It started with solar panels and washing machines but soon extended to steel, aluminum, and many other products. China hit back with its own tariffs on American goods. This back-and-forth continued for nearly two years, affecting over$450 billion worth of trade.
India also got caught up in this. The U.S. imposed tariffs on Indian steel and aluminum exports, worth about $1.1 billion. Later, in 2019, India was removed from the Generalized System of Preferences (GSP), a special trade scheme that had allowed Indian goods to enter the U.S. with lower taxes. Losing this status made Indian products like pharmaceuticals, textiles, and auto parts more expensive in the U.S. market.
For businesses, it was a tough time. Markets were volatile, orders were delayed, and costs went up. Indian exporters had to work harder to stay competitive while investors watched their portfolios swing up and down.
2025: Why Are We Talking About Trade Wars Again?
In February 2025, U.S. President Donald Trump announced a 10% tariff on all Chinese imports—yes, on everything. This is different from last time when tariffs were imposed in stages, targeting specific products like steel or electronics. This time, it’s broader and covers all goods coming from China.
China wasted no time in responding. They imposed tariffs of 10% to 15% on U.S. goods, targeting things like coal, crude oil, liquefied natural gas (LNG), large vehicles, and agricultural machinery.
Markets reacted immediately. The Indian stock market fell sharply. The Nifty Metal Index dropped 5.6% in just three trading sessions. Investors were nervous because this is not just about the U.S. and China—it affects supply chains, trade routes, and businesses all over the world, including in India.
How This Hits India: What’s at Risk?
1. Electronics and Gadgets
A lot of what we use—smartphones, laptops, home appliances—depends on components imported from China. If this trade war leads to disruptions, these products could become costlier or harder to get. Indian manufacturers relying on Chinese parts will struggle, and those costs might get passed on to customers.
2. Medicines and Pharmaceuticals
Most people don’t realize this, but around 70% of the raw materials (APIs) used to make medicines in India come from China. If these supplies get delayed or become expensive, the cost of medicines could rise. Hospitals, pharmacies, and even India’s huge pharmaceutical export industry could feel the pressure.
3. Cars and Auto Parts
India’s auto industry also depends on China for spare parts and key components. If these parts get stuck due to supply issues, car production could slow down, prices might increase, and delivery times could get longer.
4. Metal Industry
We’ve already seen what’s happening here. The metal sector was hit hard during the last trade war, and this time is no different. Global demand for steel, aluminum, and other metals could weaken, and Indian producers are already feeling the pinch.
5. Software and IT Services
Interestingly, during the last trade war, Indian IT companies actually benefited. As U.S. companies reduced their reliance on Chinese tech providers, they started outsourcing more work to India. Something similar could happen again, with global companies seeing India as a safer and more reliable partner.
6. Agriculture
When China reduced its purchases of U.S. agricultural goods in 2018, countries like India saw a chance to step in. Farmers here were able to export more crops like soybeans. This could happen again if China shifts its buying patterns away from the U.S.
What Happened to India’s Economy Last Time (2018–2020)?
Looking back at the numbers helps us understand how global tensions can shake up our economy:
- Stock Markets: Foreign investors pulled out ₹33,000 crore from Indian markets in 2018. Markets were choppy, with big swings whenever new tariffs were announced.
- Rupee: The Indian rupee weakened by 9.5% from 2018 to 2020, which made imports like oil more expensive but helped exporters.
- GDP Growth: India’s GDP growth slowed down, falling from8.3% in 2017-18 to 4.2% in 2019-20. Weaker global demand and domestic issues like the NBFC crisis contributed to this decline.
- Inflation: Prices rose sharply. Inflation hit 7.6% by the end of 2019, driven by costlier imports and higher food prices.
Global Picture: Not Just an India Problem
The last trade war in 2018 affected the whole world. The MSCI World Index, which tracks global stock markets, fell by more than 10% at the height of the conflict. Manufacturing activity slowed down globally, with the Global Manufacturing PMI (a measure of industrial growth) slipping below 50, indicating contraction.
Currency markets were unstable, oil prices fluctuated wildly, and investors preferred moving their money to safer markets like the U.S., pulling funds out of emerging markets like India.
So, What’s Different This Time?
While the tension is the same, the situation is slightly different in 2025:
- The tariffs this time are broader, affecting all Chinese imports into the U.S.
- China’s retaliation is more aggressive, targeting energy products like oil and LNG.
- Indian markets reacted faster. In 2018, it took months for the impact to show. This time,$180 billion was wiped off in just two days.
Final Thoughts
Trade wars might seem like distant problems involving big governments, but their effects trickle down to everyday life. When parts for your phone or car cost more, you pay more. When medicines become expensive, it affects healthcare. When businesses can’t plan properly, they hold back on hiring or expanding.
The global economy is more connected than ever. When two giants like the U.S. and China clash, the rest of the world—especially countries like India—feels the impact. While some sectors might find opportunities, overall uncertainty tends to slow down growth and affect livelihoods.
As this new chapter of U.S.-China tensions unfolds, businesses, markets, and consumers in India will all be watching closely. Because whether we like it or not, what happens there will shape what happens here.
(The author is Cofounder & Executive Director, Prime Wealth Finserv)
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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