Not Just Tariffs, Transshipments May Pose Hurdles In A New World Order

India might have to live with the 50% tariffs on US exports for a while, irrespective of small wins like a US appeals court ruling that most tariffs issued by US president Donald Trump are illegal.

What’s the best way forward for India? The country must stop fighting them and look for other markets, collaborate both internally and externally, while deepening and broadening its value chain — this is what most international supply chain experts said at the Ashwamedh-Elara India Dialogue 2025 in Mumbai on Monday.

“The world changed on April 2, 2025, and the world is heading towards re-globalisation. No single trade leader will emerge in the new world order as new coalitions form, and old ones will expand,” said Dr Richard E Baldwin, professor of international economics at IMD Business School, editor-in-chief, Voxeu.

Trump’s Toolkit To Block Trade

There is no easy way out of the trade troubles, experts said.

“Do not assume that the next administration (in the US) will be different, as there is a lot of policy inertia,” said Cameron Johnson, partner at Tidalwave Solutions and a global supply chain strategist.

Even if court rulings manage to block tariffs, there are other ways to block trade in the toolkit – without court interference.

“One of them is Section 232, wherein sector-specific actions can be taken to block them like say any product that uses a chip or a small molecule. They can always bring back a bazooka like Section 301 which is the unfair trade practices act,” said Deborah Elms, head of trade policy at Hinrich Foundation.

New Transshipment Challenges

To add to its existing troubles, India may have to contend with other challenges as well. The current global supply chain order took decades to form, and as a new order forms, it could throw up new hurdles like a redefinition of transshipments.

Currently, two types of transshipments exist – the first is when goods from another country are unloaded in a port and reloaded for the destination. This is a regular practice, which does not pose any problems. The second is the illegal version wherein goods manufactured in one country are labelled again at a port — as if they were manufactured in that country and shipped out. Now, two more layers could be created between the legal and illegal versions.

“The third and fourth definitions are complex, as they include how much value was added in the exporting country, and what percent of content is manufactured in a country like, say China. The last is the most difficult as manufacturers have to go deep into the supply chain to trace it — like suppliers ’ suppliers’ suppliers,” explained Elms.

A Chinese Handshake

Johnson believes that India must do more than assembling products. While the new world orders will take years to form, countries like India must integrate their supply chains.

For example, components used in phones might be used in many industries and cross-industry collaborations can help; bring in local manufacturers for displays, batteries etc, and invest in research and development, which countries like South Korea offer.

“India and China mending relations is a good move as we can see what technology we can get from them. China will be dominant for 25 years in global manufacturing as it’s embedded and to outdo it, countries have to spend $5 trillion in 20 years,” Johnson added.

China’s growth in manufacturing is no accident or luck either. “They had smartly recognised the importance of green technologies decades back and also invested in mining of rare materials, with foresight,” said Ajai Shrivastava, founder of Global Trade Research Initiative.

India, on the other hand, will have to work on providing its industry with a competitive edge. The land costs in the country are high, and the laws are complicated. The cost of capital and energy is also extremely high, and each state has different laws, which worry investors, both Indian and international. Experts even lamented that a large number of holidays that Indians enjoy for festivals do not go down well with foreign companies waiting for supplies.

In spite of the many drawbacks, India might be sitting on a unique once-in-a-lifetime opportunity and must seize the moment. “The old leaders — Japan, Korea, the US, Europe — are past their peak. Outside of China, India is the only country capable of manufacturing at a true scale. The window is open, but not forever," added Cameron.

Open To New Possibilities

India’s US tariffs come with a caveat — exemptions to generic medicines as well as Apple products. That brings down the net tariff impact to 36%, explained Baldwin. Yet, many sectors like gems and jewellery polishers, garment manufacturers and others face an uncertain future.

While building long-term value, India might also have to keep the wheels of the trade running with policy and other support. As per reports, the government is planning relief measures for exporters like liquidity relief and easing special economic zones (SEZ) norms etc, but more needs to be done, experts say.

“Import duties must be removed and that could take away some of the variability,” comments Prashant Agarwal, co-founder and joint managing director of Wazir Advisors.

The country has signed several free trade agreements: with the UK, Australia and has existing ones with Japan, South Korea and Singapore. They must keep an open mind to negotiate more trade agreements, as they prepare for the new world order.

“In Geneva, India is known as a country which always says – no. That must change,” Baldwin summed up.