India may attract lower US tariffs than many other Asia Pacific (APAC) countries, making it a more attractive destination for global investment, Moody’s Ratings said on Thursday.
According to the ratings agency, these lower tariffs make it cheaper to export goods from India, potentially helping the country become a major global manufacturing hub. The report also highlighted that the signing of a free trade agreement (FTA) with the UK in May, along with ongoing negotiations for an FTA with the European Union, could further support India’s manufacturing ambitions. However, Moody’s also cautioned that the United States’ efforts to reshore select manufacturing sectors could limit how much India benefits.
“In contrast to countries like Cambodia and Vietnam, India has the potential to emerge as a beneficiary of a tariff-driven shift in investment and trade flows. India may be subject to lower tariffs than many in APAC, which could help the economy attract further investment flows and support its development as a global manufacturing base,” the agency noted.
The US imposed a 26% reciprocal tariff on Indian goods but has suspended it for 90 days. However, the baseline 10% tariff on Indian exports remains in effect. India is currently seeking a full exemption from the additional 26% levy.
Moody’s observed that several APAC economies have gained from the diversification of manufacturing and investment away from China over the past decade. However, the broad scope of the new tariffs announced in April has changed the geopolitical dynamics for many of these countries, complicating the global supply chain balance.
Cambodia and Vietnam—two key beneficiaries of China’s manufacturing shift—were hit with some of the highest tariff rates globally. The US imposed a 49% tariff on Cambodian goods in April, later reduced to 10% during a 90-day pause. A reversion to higher tariffs could reduce investment inflows, weaken competitiveness, and slow diversification beyond the garment sector. Similarly, Vietnam faced a 46% tariff in April, which was also reduced to 10% temporarily as part of the same pause.
Moody also mentioned that given the weaker economic outlook, it expects the interest rate environment across APAC and globally to become more accommodative in the second half of 2025.