Americans stand to benefit in the long term from diversifying where U.S. companies build their products, moving manufacturing away from China and into India. But this move would not be without short-term costs.
China stands as a manufacturing colossus, producing nearly 30 percent of the world’s goods, from iPhones to steel. India, despite its growing economy and young workforce, trails far behind, contributing just 3 percent to global manufacturing output. Nonetheless, India has emerged as a key alternative, with a population of 1.4 billion and a relatively untapped trade market for the U.S. given the current tariff regime.
American companies have for decades turned a blind eye to China’s authoritarianism, lured by cheaper goods while ignoring the nation’s hegemonic aims of a different world order. Yet it is China’s authoritarianism and its resulting cultural and political landscape that America has profited from — giving China the edge over India for decades to come in manufacturing.
Understanding this tradeoff — increasing trade with India, a country that has more in common with the U.S. politically, but is decades behind in manufacturing infrastructure — offers lessons for policymakers navigating a changing global economy. It should raise American’s awareness about quality, costs and trade challenges to come from more reliance on India.
Educational discrepancies underscore China’s advantage. China produces 3.6 million science, technology, engineering and mathematics graduates annually — many trained in vocational skills for robotics, automation and engineering. India’s 2.6 million annual STEM graduates prioritize theoretical knowledge, with only 5 percent of the workforce formally skilled compared to China’s 30 percent.
Moreover, cultural biases favoring white-collar careers such as information technology leave India short of factory-ready technicians, risking consistent quality production in high-tech goods for American consumers for the short-term. China’s Foxconn assembly lines, for instance, produce half the world’s smartphones with defect rates as low as 0.1 percent. India’s early iPhone production has suffered substantially higher rejection rates. For Americans, this will mean less reliable goods and higher prices.
In China, millions are forced to migrate to industrial centers like the Pearl River Delta, met with grueling schedules to fuel production. The state’s power over the labor supply supports China’s dominance in global supply chains. India’s autonomous ecosystem cannot sustain mass labor migration, limiting workforces for mega-factories. India’s manufacturing remains dispersed, lacking China’s concentrated hubs, which will raise costs and delays for U.S. buyers accustomed to China’s grip on supply chains.
Policies like “Made in China 2025” poured $1.4 trillion into high-speed rail, state enterprises and subsidies executed without political, media or public resistance. The “Make in India” initiative, launched in 2014, faces delays from coalitional politics. India’s slower policy execution may disrupt supply chains for some time.
Infrastructure in India is decades away from competing with China, where 37,000 kilometers of high-speed rail and massive ports have slashed costs. India’s congested ports, poor roads and frequent power outages (costing 7 percent of GDP) inflate prices. Goods from India such as smartphones are 5 to 10 percent more expensive than China’s due to logistics and labor costs. American consumers will face higher retail prices, potentially adding to inflation as a result.
China exports $3.6 trillion in goods annually, while India exports just $750 billion, with less focus on manufactured products. China ranks 31st globally in ease of doing business, while India ranks 63rd, reflecting the gaps in regulation and infrastructure.
Yet India holds immense promise. Its young workforce (median age 28 vs. China’s 38) and leadership in pharmaceuticals (producing 40 percent of U.S. generics) signal immense potential over the long term. Investments from Apple and Tesla ($5 billion in foreign direct investment in 2024) and reforms like $100 billion in highways by 2025 will narrow the gap. U.S.-India trade agreements — potentially lowering tariffs to 0 percent — and semiconductor partnerships will bolster capabilities, but matching China’s scale will take decades.
As America assesses its supply chains and looks to wean off China in the years to come, it will have to consider the standard China has set and how it has conditioned U.S. dependency. India’s trade expansion with America has the potential to propel its own economic leadership on the world stage, but it risks falling short for years to come. Policymakers and consumers must understand these trade-offs as investment in India’s growth takes hold — and prepare for short-term challenges.
Thomas Heger received a bachelor of science from Yeshiva University and is an alum of the Straus Center for Torah and Western Thought.