US-China Trade War Escalation Risks Goods Dumping in India, Warns GTRI

The recent intensification of the trade conflict between the United States and China has raised concerns about potential economic repercussions globally, particularly for India. The Global Trade Research Initiative (GTRI) highlighted the need for India's Directorate General of Trade Remedies (DGTR) to be on high alert due to the possibility of China redirecting its exports to Indian markets as a result of increased tariffs by the US.

Representative image

On Tuesday, the US administration announced its decision to propose significant tariff hikes on a variety of imports from China, including electric vehicles (EVs), batteries, and other advanced technology goods. This move is seen as a rekindling of the trade war between the two economic giants. According to GTRI, such actions by the US could lead China to seek alternative markets like India for dumping these high-tech products.

However, GTRI also pointed out a silver lining for India amidst these developments. The imposition of higher duties on Chinese products such as face masks, syringes and needles, medical gloves, and natural graphite could open up lucrative opportunities for India. By increasing production and exports of these sought-after items, India has the potential to expand its trade presence in the US market. Nevertheless, it was noted that India might not see any export benefits in sectors like EVs and semiconductors, where it is predominantly an importer.

The backdrop of these developments includes a broader strategy by both the US and European Union (EU) to reduce their dependency on Chinese imports. With India's exports to China remaining stagnant at approximately USD 16.7 billion from FY2019 to FY2024, and imports from China witnessing a 44.7% increase from USD 70.32 billion to USD 101.75 billion, there's a pressing need for India to devise an effective strategy towards China.

Ajay Srivastava, Co-Founder of GTRI, emphasized that with developed countries adopting protectionist policies through routine tariff increases and substantial subsidy programs aimed at boosting local production, trade policies are increasingly giving way to industrial policies. This shift underscores the importance of strategic planning in navigating the complex global trade environment.

The ongoing US-China trade dispute has seen multiple rounds of tariff increases since its inception on July 6, 2018, when the US imposed a 25% tariff on USD 34 billion worth of Chinese goods. The conflict escalated over time, with additional tariffs being applied to a broad range of products, culminating in proposed increases that exceed the US's commitments under World Trade Organization (WTO) agreements.

These developments have led to significant trade imbalances, with the US importing goods worth USD 427 billion from China in 2023 while exporting only USD 148 billion worth of goods to China. The DGTR, as part of India's commerce ministry, plays a crucial role in addressing such challenges through anti-dumping duty, safeguard duty, and countervailing duty measures under WTO agreements.

As global trade dynamics continue to evolve amidst these tensions, it becomes increasingly important for countries like India to remain vigilant and adaptive in their trade policies and strategies.