By Jennifer Chang      Photo : CHUTTERSNAP 

U.S. tensions with China have risen, drawing attention to the way the U.S.-India-China trade relationship will develop in the future. Trade relations between the US and India are on the rise. The “decoupling” of the U.S. and Chinese economies and disruptions from COVID have heightened the importance of global corporate diversification, as multinationals shift parts of their global supply chains to countries like India. The US-India economy and trade are growing rapidly. The US has surpassed China to become India's largest trading partner. India may become the next factory of the world. This reflects the continuous strengthening of US-India trade relations. With a population of 1.39 billion, India is the third largest consumer market and the fastest growing market economy in the world. India's demographic dividend can bring enormous opportunities for US and Indian companies in technology transfer, manufacturing, trade and investment.

Since the manufacturing center in mainland China has been restricted by COVID-19 for nearly three years, some companies have chosen to move their business out of  China; the follow-up effect includes India, Vietnam, Thailand and Bangladesh competing to position themselves as manufacturing centers that can replace China Role. India is strategically located on world shipping lanes with a coastline of approximately 7,517 km. Sea freight handles about 70% of India's trade by value. India is the fastest growing economy in Asia, with increasing urbanization and a projected population of an incredible 1.7 billion by 2060. As India's economic clout grows, the U.S. says it wants a new, closer relationship with India. The United States may need India to contain China, further intensifying the so-called decoupling.

India's foreign trade with the US has seen an increase but that's not the whole story.  First, China is rapidly moving up the manufacturing value chain, producing more sophisticated products and creating a higher-wage workforce in the process. Increasing exports to the US market will help improve the overall market competitiveness of Chinese high-tech companies. Second, production costs in China, especially in big coastal cities, are rising, so some low-end manufacturers are shifting part of their production to other countries such as India. Many believe that India has the potential to become the next China, as it has become one of the top five suppliers of Christmas decorations and T-shirts to the United States. Third, although multinational companies have moved part of their supply chains to India, manufacturing companies will not move all of them out of China. It will take time for India to build a complete and comprehensive industrial chain. India's rapidly expanding manufacturing industry needs intermediate products from China, the only country recognized by the United Nations as having a complete industrial system, to support its export growth and achieve this goal. Before India can achieve this milestone, it must import a series of semi-finished products or raw materials from China. India's increased demand for these intermediate products is a corollary of the shift in production.  Therefore, there is an interesting phenomenon happening: China's exports to the US, India's exports to the US, and China's exports to India all increase at the same time. And when the three are combined together it tells the whole story.

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