Global Automakers Seek Alternatives Amid US-China Trade Tensions

As the trade tensions between the US and China persist, global automakers are increasingly looking for alternative suppliers. This shift could potentially benefit Indian auto component manufacturers, according to a report by Nomura, as cited by news agency ANI.

Rising tariffs on Chinese imports are expected to increase vehicle prices in the US, possibly dampening short-term demand. However, this scenario may encourage global Original Equipment Manufacturers (OEMs) to diversify their supply chains, with Indian auto part suppliers standing to gain as reliable alternatives.

Challenges and Opportunities for India

Despite the potential benefits, Indian manufacturers face a 25 per cent tariff on automobiles and auto components exported to the US, a remnant of President Donald Trump's reciprocal tariff regime. Affected products include wire harnesses, seat components, tyres, and more.

In 2023, China's auto parts exports to the US stood at $11 billion, compared to India's $2 billion, highlighting a significant growth opportunity for Indian exporters.

Economic Risks and the Path Forward

The report also warns of broader economic risks, suggesting that discretionary consumption in India could suffer if the tariff war escalates, especially with weakening US growth affecting consumer sentiment.

Amid these challenges, the US has introduced a 90-day suspension of tariffs for countries open to trade discussions, excluding China. India is actively negotiating a bilateral trade agreement (BTA) with the US, expected to conclude by fall 2025, which could enhance India's competitive positioning.