India's trade relations with ASEAN are becoming strained due to the impact of US tariffs and China's manufacturing overcapacity, which has led India to consider renegotiating its free trade agreement with ASEAN to include stricter rules of origin.

As global trade tensions rise, the 2010 free-trade agreement between India and ASEAN faces potential challenges, with both sides pushed into opposing camps.

The concept of tariff arbitrage has emerged, where countries could benefit by trans-shipping goods through nations with lower tariffs, raising concerns in the US about potential evasion of trade policies.

ASEAN's rapid expansion of its trade agreement with China has left India feeling sidelined and concerned about the bloc's shifting alignment in the global trade landscape.

This practice of tariff arbitrage has prompted fears that countries might exploit lower-tariff nations to bypass trade restrictions, complicating international trade enforcement.

In response to Chinese imports and the threat of tariff evasion, countries like Vietnam and Indonesia have implemented protective measures such as anti-dumping tariffs and bans on certain e-commerce activities.

These protective measures are part of broader efforts by Asian nations to safeguard their manufacturing sectors amid rising concerns over Chinese overcapacity and unfair trade practices.

While some ASEAN countries see opportunities in lower tariffs compared to China, they also fear an influx of cheap Chinese goods that could undermine their own industries.

This dual perspective highlights the complex balancing act for Asian nations as they seek to benefit from trade liberalization while protecting their local manufacturing sectors.

China's significant manufacturing overcapacity remains a core issue, fostering distrust among countries and raising the risk of manipulation in trade agreements.

ASEAN is being urged to increase transparency in its supply chains to reassure partners like India and the US, amid fears of tariff evasion and protectionism.

Trust between trading partners is crucial, and both ASEAN and India need to work together to restore confidence and prevent a shift towards closed-off trade blocs.

If trust issues persist, there is a risk that the global trading system could fracture into isolated blocs, threatening the future of open international trade.

India is actively renegotiating its free trade agreement with ASEAN, aiming to include stricter rules of origin to ensure that benefits reach local producers rather than foreign manufacturers.