India’s Supply Chain Advantage at Risk Amid Escalating US Tariff Regime

The UBI report highlights that India’s positioning in the global trade hierarchy has reached a critical inflection point. For several years, India has been a primary beneficiary of the 'China Plus One' strategy, as multinational corporations sought to diversify their manufacturing bases away from Beijing to mitigate geopolitical risk. However, the introduction of fresh US tariffs has shifted the economic calculus. According to UBI, India now finds itself in a precarious 'middle ground.' While it is not the primary target of the most aggressive trade measures, it is no longer shielded from the broader trend of American protectionism. This positioning provides a temporary buffer, but the report warns that this advantage is highly sensitive to further policy shifts.

The core of the concern lies in the thin margins that define global electronics, automotive components, and textile manufacturing. India’s competitive edge is built on a combination of relatively low labor costs, government-backed Production Linked Incentive (PLI) schemes, and a massive domestic market. When the US imposes tariffs, it effectively acts as a surcharge on these advantages. If the US were to implement further hikes, the cumulative cost of importing from India could surpass the cost of sourcing from closer-to-home alternatives like Mexico or more established hubs like Vietnam. For supply chain professionals, this means the 'India hedge' is becoming more expensive and less certain, requiring a re-evaluation of long-term sourcing contracts.

“

The Indian government has committed billions to the Gati Shakti National Master Plan, aimed at reducing logistics costs from approximately 14% of GDP to under 10%.

Furthermore, the UBI report suggests that the erosion of these advantages would have a cascading effect on India’s logistics sector. The Indian government has committed billions to the Gati Shakti National Master Plan, aimed at reducing logistics costs from approximately 14% of GDP to under 10%. These investments are predicated on high export volumes and the integration of Indian ports into global value chains. If tariffs dampen demand for Indian-made goods in the US—which remains India’s largest trading partner—the utilization rates of new ports, dedicated freight corridors, and multi-modal logistics parks could fall short of projections. This creates a secondary risk for logistics providers and infrastructure investors who have bet heavily on India’s manufacturing boom.