What the Framework Means for Emerging Markets (Including India): Winners, Losers and the Ripple Effects of US-China Trade Calm

by KarNivesh | 29 October, 2025

After months of rising trade tensions between the world’s two biggest economies, the United States and China have finally agreed on a new trade framework in Kuala Lumpur. This deal, reached in October 2025, is a turning point that could reshape global trade and impact emerging markets like India, Vietnam, Malaysia, and Indonesia.

The new agreement comes just in time to prevent a major global economic crisis. Both nations were on the edge of a 100% tariff war, which could have doubled import costs and disrupted global supply chains. Now, with this framework, trade is expected to stabilize—at least for a while.

The Framework Explained: Key Highlights

The US-China deal has five major parts, each designed to reduce tensions and stabilize trade:

1. Tariff Suspension:Both countries agreed to pause their tariff increases. The US will keep its tariffs at 30%, and China will maintain 10% on American goods. This avoids the disastrous 100% tariffs that were planned, giving companies breathing space to plan and manage inventories.

2. Rare Earth and Mineral Exports:China, which controls about 70% of global rare earth mining and 90% of processing, agreed to delay new export restrictions for one year. This is important because rare earths are essential for making smartphones, electric vehicles, and defense equipment.

3. Agricultural Trade:China will restart large purchases of US soybeans—worth $11.6 billion (₹96,880 crore) in 2023. This is a major relief for American farmers and could calm global food prices.

4. Fentanyl and Shipping Fees:The two sides also reached understanding on fentanyl (a chemical used in drugs) and shipping tariffs. This will lower port service fees that had made transport costs higher.

5. TikTok Settlement:The deal includes a settlement allowing TikTok to continue operating in the US, ending years of dispute over data privacy and ownership.

US-China Trade Framework: Five key components showing mutual benefits for both superpowers

Winners and Losers: How Countries Benefit

Big Winners – Vietnam, Thailand, and Malaysia

• Vietnam has become one of the biggest beneficiaries. It exported over 2 million shipping containers of goods to the US in 2024—twice as many as in 2017. Many companies are shifting manufacturing from China to Vietnam to avoid tariffs.

• Thailand has seen its exports to the US triple. It recently signed a new agreement with the US that reduces tariffs on 99% of American products, supporting its electronics and agricultural sectors.

• Malaysia is rapidly emerging as a global semiconductor hub. Companies like Nvidia, Intel, and Infineon are investing heavily—Nvidia alone is building a ₹35,905 crore ($4.3 billion) AI data center. Malaysia’s government hopes to attract ₹8,35,000 crore ($100 billion) in semiconductor investments over the next decade.

India’s Mixed Results: Gains and Challenges

India’s position in this new trade setup is both positive and challenging. Some sectors will gain, while others face headwinds.

Pharmaceuticals – Clear Winner

India’s pharma exports to the US—worth ₹75,150–₹1,06,045 crore ($9–12.7 billion) a year—are exempt from US tariffs. Big players like Sun Pharma, Dr. Reddy’s, and Cipla will benefit. With Chinese producers under pressure, Indian drug makers could capture more of the global market. In fact, Indian generics save the US healthcare system nearly ₹18,37,000 crore ($220 billion) annually.

Textiles – Competitive Edge

India exports ₹86,000 crore ($10.3 billion) in textiles to the US each year. Despite tariffs of around 50–60%, India could gain because Chinese goods would have faced 130% tariffs without the new framework. This gives Indian textile exporters an upper hand—though they still face competition from Vietnam and Bangladesh.

IT Services – Steady Performer

India’s IT exports to the US—worth ₹16,19,900 crore ($194 billion)—remain stable. While visa restrictions create challenges, the predictable trade environment supports long-term growth.

Electronics and Smartphones – Dependent on China

India exports ₹70,975 crore ($8.5 billion) worth of electronics to the US. But since it imports 80% of its components from China, any disruption there affects production. The framework gives temporary relief by stabilizing rare earth supplies, but India still needs to improve local manufacturing.

Gems and Jewelry – Hard Hit

This sector faces 50% US tariffs, affecting exports worth ₹3,34,000 crore ($40 billion) annually. Surat’s diamond industry, employing about 8 lakh people, is under stress. Companies are exploring relocation to Dubai or Turkey to reduce costs.

India's sectoral opportunities and challenges from the US-China trade framework, with export values in USD and INR

Other Emerging Economies

• Indonesia is positioning itself as a long-term manufacturing hub, especially in nickel and copper. It exported ₹7,26,450 crore ($87 billion) worth of goods in 2024 and is planning new investments in electric vehicle parts.

• Mexico and Canada remain largely protected under their USMCA deal, which keeps 84–85% of trade tariff-free. However, they must prevent Chinese goods from entering the US through indirect routes.

• Bangladesh and Sri Lanka, on the other hand, are struggling due to higher tariffs and limited manufacturing diversity.

Rare earth supply chain dynamics revealing China's dominance and how the trade framework impacts global players

The Rare Earth Race and India’s Opportunity

Rare earth minerals are vital for modern technology, but China dominates their supply. India has the fifth-largest reserves (6.9 million tonnes) but produces less than 1% of global output. To fix this, the Indian government has launched a ₹7,300 crore incentive program and a ₹500 crore National Critical Minerals Mission.

These programs aim to boost local mining and processing. However, experts say it may take up to a decade to develop this industry. India must also partner with countries like the US, Australia, and Japan for technology and refining expertise.

Semiconductors and Emerging Markets

Semiconductors are the backbone of everything from smartphones to AI. The new framework will help countries like Malaysia and India attract investments in this sector. Malaysia is training 60,000 engineers, and India is promoting semiconductor manufacturing through its Production-Linked Incentive (PLI) scheme.

Emerging markets can benefit most by focusing on assembly, testing, and packaging (ATP) rather than high-end chip fabrication, which requires billions in investment.

Agriculture: The Soybean Story

Soybean prices rose to ₹889 per bushel ($10.6) after the deal, driven by expectations of new Chinese purchases. China had stopped buying US soybeans for five months, hurting American farmers, but the new agreement is reviving trade.

For India, the impact is complex. India’s soybean price is ₹53,440 per ton ($640)—much higher than the US rate of ₹40,080 ($480), making imports cheaper. However, India restricts genetically modified soybeans, limiting large-scale imports. Domestic farmers fear that opening the market to US soybeans could harm them.

Geopolitical and Economic Ripples

The trade framework doesn’t end competition between the US and China—it only pauses escalation. Both sides will still compete in technology, energy, and influence. For emerging markets, this is both a challenge and an opportunity.

India needs to play a careful balancing act—maintaining trade with both superpowers while reducing dependence on Chinese imports and Russian oil. To succeed, India must strengthen domestic production, logistics, and infrastructure.

What Lies Ahead

The US-China deal brings short-term peace, but it’s fragile. Many deeper issues—like intellectual property rights and subsidies—remain unresolved. For countries like India, Vietnam, and Malaysia, this “trade calm” is a golden window to invest in infrastructure, develop industries, and prepare for the next global disruption.