As the Trump administration proposes the introduction of “reciprocal tariffs”—taxing imports at the same rate foreign governments impose on U.S. goods—the global electronics and semiconductor industry is bracing for ripple effects that could redefine supply chains, trade routes, and strategic investments. With India emerging as a serious contender in global electronics manufacturing, these policy shifts could present both opportunities and challenges for the country’s growing semiconductor ambitions.
Global Supply Chains in Flux
The electronics and semiconductor sectors are among the most intricately connected global industries. From chip design in the U.S. and Taiwan, to wafer fabrication in South Korea and China, to final assembly in India and Vietnam—every component in a finished product typically crosses multiple borders. A tariff war threatens to disrupt these finely tuned global supply chains.
This risk was underscored recently when President Donald Trump announced a staggering 104% tariff on Chinese electric vehicles, shaking global markets. Reacting to the tariff hike, Tata-owned Jaguar Land Rover halted its shipments to the U.S. for a month in response to a separate 25% import tariff, citing sudden cost pressures and logistical uncertainty. These developments signal a volatile phase for companies relying heavily on cross-border operations.
For India, which imports up to 88% of its semiconductor requirements, disruptions in sourcing from East Asian hubs could cause short-term volatility in the availability and pricing of key components. Additionally, higher tariffs could push up input costs for Indian manufacturers exporting to the U.S., making pricing less competitive.
A Tailwind for ‘Make in India’?
However, there’s a silver lining. As geopolitical tensions rise and multinationals seek “China Plus One” strategies, India is increasingly viewed as a viable alternative. The Indian government’s push under the Production Linked Incentive (PLI) scheme, coupled with new semiconductor fabrication plans and robust demand for electronics, places the country in a favorable position to absorb diverted investments.
This shift is already underway. Apple and Samsung are reportedly accelerating plans to shift manufacturing to India, partly to hedge against Trump’s rising tariffs on Chinese goods. Apple, for instance, has already begun iPhone production at Foxconn’s Tamil Nadu facility, with plans to ramp up output in 2025. These strategic realignments bolster India’s role in the global value chain.
If reciprocal tariffs deter trade between the U.S. and China, Indian manufacturers may gain a competitive edge—particularly in segments like PCB assembly, mobile manufacturing, and back-end chip packaging. This could catalyze India’s ambition to become a $300 billion electronics manufacturing hub by 2026.
Impact on Competitiveness
Over 80% of the U.S. semiconductor industry’s production is destined for international markets, making it highly dependent on global exports. Imposing higher tariffs may weaken its global competitiveness, particularly if retaliatory measures by other countries kick in. On the flip side, Chinese manufacturers could double down on building self-reliant supply chains, while Indian firms may find new export opportunities if trade patterns realign.
Yet, uncertainties remain. India’s electronics industry still depends significantly on imports of chips and sub-components. Tariff-induced disruptions could lead to cost escalations, affecting price-sensitive consumer markets both in India and abroad.
Export Pressures & Strategic Realignment
With India expanding its export capabilities in smartphones, consumer electronics, and electric vehicle components, increased trade barriers may force a rethinking of pricing strategies. Electronics brands exporting to the U.S. could face squeezed margins or may need to reroute operations to avoid tariffs.
To stay competitive, global electronics firms may explore shifting part of their production from China to tariff-neutral zones such as India, Mexico, or Southeast Asia. This trend, already underway post-COVID-19, may accelerate under tariff-driven pressure.
Policy Implications for India
India must walk a fine line. While these global shifts could open up new export windows, there’s also a risk of becoming collateral damage in a broader trade conflict. To safeguard domestic manufacturers and leverage emerging opportunities, the Indian government should consider:
- Negotiating strategic trade agreements with the U.S., EU, and ASEAN nations.
- Providing greater ease-of-doing-business incentives for relocating manufacturers.
- Accelerating semiconductor ecosystem development to reduce import dependencies.
- Offer temporary tariff shelters or rebates for affected MSMEs in electronics exports.
Conclusion: A Defining Moment
The Trump administration’s proposed tariffs may well be a turning point for the global semiconductor and electronics industry. For India, this could serve as both a test and an opportunity—to deepen its electronics manufacturing base, attract foreign investments, and reposition itself as a trusted global partner in a rapidly changing trade environment. Strategic foresight, nimble policy responses, and continued innovation will be key to navigating the challenges ahead.
