Gujarat’s chemical industry looks to China as India’s US exports stall

Chemical exports from Gujarat and India to the United States have dropped sharply and are now nearly at a standstill, delivering a severe blow to the country’s chemical industry. The decline follows the imposition of a 25% tariff by the US on Indian chemicals, which has significantly reduced India’s competitiveness in the American market.

Industry sources say that exports to the US have slowed considerably and are “on the verge of stopping entirely,” highlighting the urgent need for alternative markets and strategies amid growing uncertainty in global markets.

The tariff has affected a wide range of chemical segments, including specialty chemicals, dyes, and intermediates. Several mid-sized manufacturers in Gujarat report reduced order volumes, delayed shipments, and uncertainty over long-term contracts with US buyers.

New opportunities emerge with China

Amid the downturn, improving diplomatic and trade relations with China are opening new avenues for India’s chemical and pharmaceutical sectors. China could provide critical raw materials for the pharmaceutical and dye-intermediate industries, as well as advanced automation technologies for chemical manufacturing.

Experts note that adopting Chinese automation systems, which enable chemical processing with minimal human intervention, could significantly reduce production costs. Currently, around 80% of China’s chemical manufacturing units are automated, compared with roughly 10% in India. Automation could potentially cut costs by 10–20%, while access to China’s lower-cost raw materials could further enhance India’s competitiveness.

Industry analysts suggest that strengthening ties with China could also encourage joint ventures and technology partnerships, potentially allowing Indian firms to adopt global best practices in production, safety standards, and environmental compliance, which are increasingly critical for export markets.

High costs challenge Indian manufacturers

Finished chemical products from India are estimated to be about 20% more expensive than comparable products from China. Industry insiders emphasise that integrating Chinese automation technology and sourcing raw materials directly from China could help Indian manufacturers narrow this gap.

While the shift to Chinese raw materials and automation presents opportunities, manufacturers caution that supply chain reliability and regulatory approvals will play a key role in determining the speed and scale of adoption.

Improved connectivity and trade ties

Sources in Ahmedabad’s chemical sector note that new direct flight services between India and China, combined with improving diplomatic relations, are likely to ease the import of essential raw materials. Indian companies already rely heavily on China for base chemicals used in dye intermediates and bulk drugs essential for pharmaceuticals.

Better access to Chinese raw materials and technology could provide “substantial benefits” to India’s chemical and pharmaceutical industries, helping firms reduce costs and regain a stronger position in global trade.