It’s a moving target that India can still strike

For countries like India, CP1 was seen as an opportunity to become a credible alternative. But that window is narrowing. Amid global trade uncertainty and tariff wars, the CP1 paradigm faces new challenges. For India to benefit meaningfully, CP1 must be treated as a foundation for long-term, policy-driven industrial growth.

Also Read: Ajit Ranade: The success of ‘Made in China 2025’ alarmed the West

CP1 was built on three key assumptions: that geographic diversification mitigates geopolitical risk; that complete decoupling from China is unrealistic; and that global supply chains are modular and relocatable. These three led the initial momentum. From 2020 to 2024, the share of Chinese goods in total US imports dropped from 18% to 14%, while countries like India, Vietnam, Mexico and Thailand attracted the interest of global manufacturers seeking diversification.

Tariffs have intensified since under the trade-policy turn taken by US President Donald Trump. Some estimates suggest that effective US tariff rates on Chinese goods may exceed 50%, while CP1 countries such as Vietnam and Thailand could face duties of up to 46%. 

The cost advantage of producing goods outside China for the US market is in flux, with clarity awaited on how trade deals will reshape the picture. Thailand, for example, could lose up to $24 billion in exports if a proposed 36% US tariff is imposed, offering a cautionary tale of how fragile a country’s CP1 hub status can be.

Also Read: It’s time for India’s export strategy to converge its US and China tracks

Whether CP1 remains viable will depend heavily on the outcome of US trade negotiations with China as well as ‘plus one’ hubs. If Chinese access to the US market does not materially diminish, CP1 hopefuls would see their prospects decline.

Compounding this uncertainty is China’s increasingly assertive posture. Beijing is unlikely to yield to what it views as containment efforts. As a strategic response, China has weaponized trade by restricting its exports of rare earth minerals, magnets and other critical inputs essential to a wide range of industries. China’s leverage is formidable: nearly 40% of its exports to the US are in categories where it controls over half of America’s imports.

Yet, the US market represents less than half of China’s export base in the same segments, giving Beijing room to retaliate without taking a severe blow. This asymmetry is one reason why the White House exempted products like smartphones and laptops from its recent tariffs, and later struck a mini-deal with China that saw both sides agreeing to lower tariffs and ease export curbs.

Also Read: Rare earths: China is choking its own prospects of leadership

Deeper structural challenges also threaten CP1 hopes. For one, ensuring genuine supply chain independence from China is increasingly difficult. As Chinese firms expand abroad, their integration into CP1 countries’ manufacturing ecosystems increases the risk of hidden exposure—raising compliance and regulatory risks for global firms. 

Second, CP1 strategies are vulnerable to domestic political shifts. Countries like India and Canada are stepping up efforts to protect domestic industries from Chinese export surges and may pursue localization policies driven by local needs. To position itself as the world’s top ‘plus one,’ India must act decisively across five policy areas.

Expand infrastructure: Go beyond flagship corridors and ports to modernize last-mile connectivity, industrial parks and electricity reliability—core requirements for export-oriented factories.

Strengthen trade diplomacy: India must pursue bilateral and multilateral trade agreements with CP1 countries and major export markets such as the US, EU and Japan. Without tariff predictability, even the best industrial policies risk being undermined.

Ensure supply chain transparency: As the scrutiny of Chinese-origin inputs grows, India must support its manufacturers in certifying the ‘non-China’ origins of their inputs through robust traceability mechanisms and streamlined customs processes.

Increase domestic value addition: Despite healthy export numbers, India’s domestic value addition remains low—under 10% for premium electronics. Raising this share is critical to making the most of value chains.

Invest in workforce development: To move up the value curve, India must address its  skill gaps. Reaching our electronics manufacturing target of $300 billion, for example, will require training 8-10 million workers over the next decade.

Also Read: China plus one: Apple and India might need to woo not just Trump but Xi too

CP1 faces other headwinds. As Chinese firms expand into CP1 markets, supply chain independence becomes harder to verify. Host countries like India have their own economic and political constraints. Domestic protectionism and capital flow regulations further complicate the execution of a cohesive CP1 strategy.

Today’s CP1 environment is markedly different from 2020’s. Global trade has shifted from prioritizing efficiency to emphasizing security; from cost optimization to control; and from globalization to guarded openness. India must adapt to this new paradigm. Low labour costs or incentive schemes are not enough to attract global manufacturers, which want geopolitical agility, regulatory stability and reliable infrastructure.

India’s window of opportunity is open but shrinking. India must respond with urgency, strategic vision and coordinated policies to fulfil its potential as the world’s preferred destination for manufacturing.

The author is a strategy and public policy professional. His X handle is @prasannakarthik