The New York Times reports:

President Trump’s 50 percent tariffs landed like a declaration of economic war on India, undercutting enormous investments made by American companies to hedge their dependency on China.

India’s hard work to present itself to the world as the best alternative to Chinese factories — what business executives and big money financiers have embraced as part of the China Plus One strategy — has been left in tatters.

Now, less than a week since the tariffs took full effect, officials and business leaders in New Delhi, and their American partners, are still trying to make sense of the suddenly altered landscape.

Just how much things have changed was evident from Prime Minister Narendra Modi’s visit to China over the weekend to meet with Xi Jinping, China’s top leader. Trade and political relations between India and China have been strained, at times severely, and it was Mr. Modi’s first trip there in seven years.

The China Plus One approach has been critical to India’s budding ambitions to become a factory powerhouse. Manufacturing growth, especially in high-end sectors like technology, was seen by India as addressing chronic problems like the underemployment of its vast population of young workers. Now pursuing that path, without the support of Washington, and in potentially closer coordination with China, promises to be even more difficult.

Mr. Trump’s tariffs are already causing dislocation in supply chains. India has been rendered far less enticing to American importers. Companies can go to other places for lower tariffs, like Vietnam or Mexico. A U.S. court ruling, which on Friday invalidated the tariffs but left them in place while Mr. Trump appeals, did nothing to repair the rupture between the countries.

The “Trump shock will reduce manufacturing export growth and kill even the few green shoots of China Plus One-related private investment,” four Indian economists, including a former chief economic adviser to Mr. Modi, wrote in an Indian newspaper last week.

India still aspires to become one of the world’s three largest economies. It is currently fifth and on pace to overtake Japan soon. If the United States won’t help or, worse, gets in its way, India has no choice but to get closer to Beijing, even as it holds to its goal of becoming a stronger manufacturing rival to its giant neighbor. [Continue reading…]