Turning tensions into triumphs: how trade tariffs can boost India's specialty chemicals sector

Volatile input costs, regulatory bottlenecks, and infrastructure limitations continue to afflict the Indian chemicals ecosystem

The global trade landscape is once again clouded in uncertainty – with firm impositions of tariffs, furious retaliations, some counter-tariffs, truces, and also renegotiations. This time with a renewed intensity as the current US administration pledges to pursue this strategy of sweeping tariffs on imports from key trade partners until there is a new normal. While these policies primarily originate from domestic economic anxieties, they will surely redraw global supply chains. For India, particularly in the speciality chemicals sector, this disruption presents a rare window of opportunity.

China-plus-one gains urgency

For years, global buyers have been seeking reliable alternatives to China due to concerns over supply chain concentration, regulatory opacity, and geopolitical tensions. The pandemic and the Russia - Ukraine war have only accelerated this diversification. The reimposition of US tariffs on Chinese goods—including on key chemical intermediates and finished products—adds another layer of urgency to the China-plus-one approach. India, with its strong base in specialty chemicals and an integrated value chain in petrochemicals, is well-positioned to seize such an opportunity. Its growing ecosystem of contract manufacturers further strengthens this advantage.‍

Differential tariffs: A double-edged sword with a silver lining

The introduction of contrasting tariffs based on region is reshaping the cost dynamics of global trade. While Indian exporters may experience short-term uncertainty, especially in segments such as agrochemicals or pharmaceutical precursors and intermediates—they also stand to benefit. Buyers in the US and Europe are increasingly seeking tariff-neutral suppliers, creating new opportunities for Indian businesses.

Segments such as aroma chemicals, personal care ingredients, dyes & pigments, and electronic chemicals are particularly poised for growth. These are value-added categories where India already has a growing presence and where tariff-induced pricing pressures on Chinese players can make Indian products more appealing—even with higher input costs.‍

What global buyers are seeking

Customers across the world are not solely focused on price competitiveness. They also seek predictability, compliance with environmental standards, IP protection, and scalable capacities. To meet these expectations, Indian chemical manufacturers must invest in green chemistry, process digitisation, and certifications such as REACH and US FDA. Furthermore, long-term offtake agreements and enhanced transparency in ESG reporting will be crucial in solidifying India’s status as a credible alternative to China.

Adaptability is key for Indian players. To capitalise on this moment, Indian players need to evolve on three fronts:

Capacity building: With demand likely to shift from China, India has a strategic opportunity to respond. It must establish integrated clusters with plug-and-play infrastructure similar to the PCPIRs (Petroleum, Chemicals and Petrochemicals Investment Regions) but with faster execution and stronger environmental safeguards.

Strategic partnerships: Collaborations with global MNCs can give Indian players a competitive edge. These partnerships—focused on technology transfer, process optimisation, and product development—are especially valuable in niche segments like high-performance polymers or semiconductor-grade chemicals.

Policy and incentive support: Government backing through PLI schemes, single-window clearances, and bilateral trade agreements (particularly with the EU and US) will be vital in maintaining this momentum. Policy stability and consistency is equally important.

Balancing act: challenges persist

Of course, it’s not all upside. Volatile input costs, regulatory bottlenecks, and infrastructure limitations continue to afflict the Indian chemicals ecosystem. Additionally, the unpredictability of US policy—should tariffs be lifted or altered under a different administration—means that Indian firms must hedge their bets and construct diversified export portfolios across multiple regions.‍

Conclusion: A strategic inflection point

The global trade war may have raised concerns across industries, but for India’s speciality chemicals sector, it presents a strategic inflection point. By embracing innovation, compliance, and capacity expansion, India can not only fill the void left by China, but also forge long-term relationships with global buyers seeking stability in an increasingly fragmented world.

For this to happen, we must:

- build a position that doesn’t rely on short-term tariff wins, but on long-term trust

- obsess about quality

- make customer reliability a central tenet

- align with global standards and compliance norms

- leverage government-led policies like the PLI scheme and PCPIR zones

- explore untapped global markets to future-proof exports 

The next decade could well belong to Indian speciality chemicals—if we play our cards, and more importantly our chemistry, right.

(Disclaimer: The opinions expressed within this article are the personal opinions of the author Mr. Raghunath V Iyer, Vice President, Distil. The opinions appearing in the article do not reflect the views of ICN and ICN does not assume any responsibility or liability for the same.)