India’s Manufacturing Boom: How U.S. Tariffs on China Could Be a Game-Changer
India is looking to attract more manufacturing businesses as U.S.-China tensions escalate. Tamil Nadu, known for its efficient bureaucracy and skilled workforce, is emerging as a major hub. Foxconn’s Sriperumbudur plant, which assembles iPhones, employs a workforce that is 70% women, offering them wages double what they previously earned. India currently produces 15% of all iPhones and aims to increase this to 25% in the coming years. Mobile phone exports surged by 44% in 2024, reaching $20 billion.
The shift in global supply chains, driven by U.S. tariffs on China, has helped India’s manufacturing sector grow. However, Trump’s 20% tariffs on China were lower than expected, limiting India’s potential gains. Additionally, India’s own high tariffs could lead to U.S. reciprocal tariffs, potentially costing the country $7 billion in trade losses. Some experts believe Trump is more focused on boosting investment within the U.S. rather than helping India. Despite these challenges, Tamil Nadu officials remain optimistic, emphasizing India’s large consumer market and strategic importance. India continues to position itself as a key global manufacturing destination.
India’s Manufacturing Boom: How U.S. Tariffs on China Could Be a Game-Changer
As trade tensions between the U.S. and China persist, India is positioning itself as a key alternative for global manufacturers seeking to reduce their dependence on China. The southern state of Tamil Nadu, known for its efficient administration and skilled labor force, is actively attracting foreign investors to fuel its industrial growth.
Women Driving Manufacturing Growth
In Sriperumbudur, a major industrial hub in Tamil Nadu, factories are increasingly hiring women. Foxconn, a leading Apple supplier that assembles iPhones, has a workforce that is approximately 70% female. Many young job seekers, like 21-year-old Keerthana, are drawn to the sector due to better wages—she recently secured a job at Foxconn, doubling her previous salary from a garment factory to around $170 per month. Eager to support her family, she plans to send her earnings home to her father.
Economists, including former economic adviser Arvind Subramanian, emphasize manufacturing as a key driver of women’s empowerment and poverty reduction. Despite accounting for only 6% of India’s population, Tamil Nadu employs over 40% of the country’s female factory workers, underscoring its role in fostering inclusive job opportunities.
India’s Expanding Manufacturing Sector
Since the Trump administration imposed tariffs on Chinese imports and the COVID-19 pandemic disrupted supply chains, global companies have been shifting production away from China. Even under President Biden, U.S. tariffs on Chinese goods remain in place, indirectly boosting India’s manufacturing sector.
Foxconn, which began expanding in India in 2017 as part of Apple’s effort to diversify its production, has helped make India the second-largest iPhone exporter after China. Currently, India manufactures nearly 15% of iPhones worldwide, and its mobile phone exports soared to $20 billion in 2024—a 44% increase from the previous year. The country aims to raise its share of iPhone production to 25% in the coming years.
Challenges on the Horizon
Despite these gains, significant obstacles remain. Although former President Trump initially threatened tariffs as high as 60% on Chinese imports, the actual rate was set at 20%, falling short of expectations in India. Diplomatic analyst Suhasini Haidar notes that India’s hopes for a major exodus of manufacturing from China have yet to fully materialize.
Furthermore, India’s high tariffs on U.S. goods—ranging from 45% on vegetable oils to 150% on alcoholic beverages—have drawn criticism. The U.S. Trade Representative has called these some of the highest tariffs among major economies. In response, the U.S. plans to introduce reciprocal tariffs starting April 2, which could cost India up to $7 billion in trade losses, according to Citigroup estimates.
Balancing Optimism with Reality
A Tamil Nadu government official, speaking anonymously, remains optimistic. He believes that India’s large consumer market and the global push to diversify supply chains beyond China will continue to attract investors, regardless of U.S. trade policies. However, uncertainty surrounding U.S. decisions, particularly under a potential second Trump administration, could slow investment commitments.
Political expert Ashutosh Varshney of Brown University adds that Trump’s primary goal is to bring manufacturing back to the U.S., which may limit incentives for companies to shift production to India.
Looking Ahead
Tamil Nadu continues to position itself as a premier manufacturing hub by leveraging its skilled workforce and investor-friendly policies. While ongoing U.S.-China trade tensions create opportunities, India must address its tariff policies and infrastructure challenges to fully capitalize on these shifts. For now, the state’s success in attracting major firms like Foxconn serves as a model for combining economic growth with social progress, particularly for women workers.
The road ahead is complex, but India’s potential as a global manufacturing powerhouse remains strong.