India May Gain Manufacturing Edge Amid US Tariff Shifts, Says Moody’s

India could emerge as a key beneficiary of shifting global trade dynamics as the United States imposes steeper tariffs on several Asia Pacific economies, according to Moody’s Ratings. While countries like Vietnam and Cambodia, once top alternatives to China, face rising costs and trade frictions, India appears better positioned to weather these headwinds and attract long term investments.

In its latest Asia Pacific sovereign outlook, Moody’s noted that the recent tariff hikes by the US in April 2025 have significantly affected many export driven economies in the region. These countries, which earlier capitalized on supply chain diversification away from China, are now grappling with higher costs and uncertainty. In contrast, India may be subject to lower tariff burdens, giving it a relative advantage as global firms reassess their sourcing and investment strategies.

Moody’s observed that India’s ongoing efforts to secure favorable trade deals could further boost its appeal. The country recently signed a free trade agreement with the United Kingdom and is negotiating a broader deal with the European Union. Additionally, India is currently engaged in critical talks with the United States, seeking a permanent resolution on tariff exemptions.

A key deadline looms as the 90 day suspension of a 26 percent reciprocal tariff on Indian goods by the US is set to expire on July 9. India is pushing for full exemption from these additional duties, while the US seeks greater access for its agricultural products. Negotiators on both sides are working to finalize a mini trade deal before the deadline, with labour intensive Indian exports a key focus.

However, Moody’s also sounded a note of caution. It warned that uncertainty around global trade policy continues to weigh heavily on corporate investment decisions. While India stands to benefit from supply chain diversification, Moody’s believes that any significant realignment of global manufacturing hubs will be gradual. Companies are likely to delay or pause decisions until trade policy stabilizes.

Looking ahead, Moody’s expects interest rates across Asia Pacific and globally to ease in the second half of 2025 due to a weaker economic outlook. For India, this combination of lower tariffs, trade diplomacy, and macroeconomic tailwinds could enhance its status as a long term manufacturing destination, though the road ahead remains complex and closely tied to evolving global policies.

Tags: Moody’s Ratings, India manufacturing, US tariffs, APAC trade, global supply chains, Vietnam, Cambodia, tariff impact, ONGC trade talks, EU FTA, UK trade agreement, Indian exports, US India trade deal, global investment trends, economic outlook 2025