Is India Gaining From China’s Decline?

International commerce often follows the simple rule: one nation’s loss can result in another’s gain. China’s loss from escalating trade tensions with the U.S. is generating gains for several Asian economies, but India is not one of them.

India is among those nations that have benefited from U.S. trade rerouting as companies diversify manufacturing away from China. But unlike its South Asian peers like Vietnam, Thailand and Cambodia, India has not yet become a major player in the "China Plus One" strategy.

The U.S. has been India's single largest export market, accounting for 15% of total exports. Higher tariffs and restrictions on Chinese goods were expected to provide to further impetus to India’s merchandise sales to America, which increased 54% to $84 billion between 2018 and 2023.

Mainland China’s share of U.S imports dropped by around 8 percentage points to under 14% over the same time period, but India’s share rose by only 0.6 percentage points to 2.7%. America’s regional trade partners have benefitted immensely from this realignment, but other Asian economies have also made greater strides than India.

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Vietnam has emerged as the biggest beneficiary from the trade diversion in the region. Its merchandise exports to the United States have surged 133% to $114 billion, and its share of U.S. imports rose from 1.7% to 3.7% over the same time period. Taiwan and South Korea have seen their shares increase by 1 percentage point and 0.7 percentage points, respectively.