India Slashes Tariffs on Critical Inputs to Cut China Dependence and Shield Exporters From Trump-Era Trade Pressures

India has moved to recalibrate its trade and industrial policy at a moment of rising global fragmentation, cutting tariffs on a wide range of capital goods and raw materials in a bid to reduce dependence on China, support its energy transition, and blunt the impact of U.S. trade actions on exporters.

The measures, announced in the annual budget on Sunday, underline how New Delhi is increasingly using customs policy as a strategic lever rather than a narrow revenue tool, as geopolitical tensions and protectionism reshape global supply chains.

Finance Minister Nirmala Sitharaman said the government would lower duties on capital goods required to process critical minerals and manufacture lithium-ion battery cells, a step aimed at strengthening domestic manufacturing capabilities essential for clean energy and electric vehicles. Tariffs were also eliminated on sodium antimonate, used in solar glass production, and on monazite, a key source of rare earth elements used in permanent magnets for EVs and other clean-energy technologies.

The rare earth decision carries particular weight. China controls more than 90% of global processing capacity for rare earth magnets and imposed export curbs last year, disrupting electric vehicle production plans in India and elsewhere. By cutting duties on monazite and related inputs, New Delhi is signaling a long-term push to build local processing capacity and reduce vulnerability to Chinese supply dominance, even though analysts caution that developing a full rare earth ecosystem will take years and significant investment.

Beyond energy transition materials, the budget included tariff concessions for raw materials used by export-oriented sectors such as marine products, leather, and textiles. These industries have faced growing pressure from U.S. tariffs imposed under President Donald Trump, who has adopted an aggressive trade stance toward partners, including India. Sitharaman framed the cuts as a way to lower input costs and preserve competitiveness for exporters navigating a more hostile global trade environment.

India also moved to support strategic and high-value manufacturing. Duties were cut on inputs used to produce aircraft parts for maintenance and repair in the defense sector, and on components for the electronics industry. Both areas are central to India’s effort to attract global manufacturers seeking to diversify away from China amid geopolitical risk and supply chain disruptions.

Analysts say the tariff reductions are closely tied to India’s ambition to reach $1 trillion in goods exports. Lower input costs could help Indian firms integrate more deeply into global value chains, improve margins, and attract foreign investment. Customs duty reforms, they argue, are a necessary—though not sufficient—condition for India to emerge as a credible alternative manufacturing hub.

At the same time, the changes reflect continuity rather than a radical departure in trade policy. Experts describe the approach as incremental and tactical, aligning India’s tariff structure with new trade deals and shifting geopolitical realities while avoiding sweeping liberalization. This caution reflects the broader uncertainty created by rising protectionism, conflicts between major powers, and the disruption of long-standing multilateral trade norms.

The budget also made a one-time concession for special economic zones, traditionally export-only enclaves, allowing them to sell into the domestic market. The move is intended to address underutilized capacity in SEZs, which have struggled amid global trade disruptions and weaker external demand. While welcomed by the industry, analysts view it as a stopgap rather than a structural fix.

However, the tariff cuts highlight how India is repositioning itself in a rapidly changing global economy. While these calibrated steps are enough to deliver a sustained manufacturing take-off, they underscore New Delhi’s growing reliance on trade policy as a strategic instrument.