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US - China Trade War and Opportunities for India

  May 27, 2020

US - China Trade War and Opportunities for India

What is the trade war about?

In the US-China trade war, US announced that tariff rates imposed on goods worth $200 billion imported from China has been increased from 10 per cent to 25 per cent and China retaliated by slapping additional tariffs on $60billion worth of goods imported from US.

How did Indian government react for boosting exports to US?

Within weeks, India's commerce ministry came out with an analysis that looked at each of the product where tariff rise was announced by the US and China to identify potential products for enhancing Indian exports. 

The findings of its study were widely circulated among the stakeholders to sensitise them and act expeditiously before competition fills up the emerging trade opportunity in both the countries.
Commerce Ministry identified  203 tariff lines where India has the ability to replace Chinese exports to US as it has both market access and is an existing competitor of China in the US market. 

The value of US imports from China (of these 203 products) is $15.5 billion, while India exports $2.4 billion worth of the same set of goods to US at the moment. 

The key products in this list - which also means strongest opportunity to increase its market share - include industrial valves, vulcanised rubber, carbon or graphite electrodes, sacks and bags of polymers of ethylene and natural honey.

What about to China?

A similar exercise carried out in the case of China found that 151 tariff lines (product categories) are such that India can replace products originating from US to that country at the moment. 

These products include pharmaceuticals, medical equipment, engines, copper ores and concentrates, granite, various rubber products etc. 

On the whole, there were 774 product lines worth $20.4 billion where China's imports from US are substantial and Indian export capabilities are also substantial.

Indian embassies in China and US are both interacting with Indian exporters to facilitate this trade opportunity in these countries.

Which products were short listed for export to the US?

Indian carpet exports can replace the Chinese carpets in the US market stems from perceived business opportunities that arise for India from the ongoing tariff war between the US and China. 

Indian tyre manufacturers have found their products become more cost-competitive after US increased tariffs on Chinese radial tyres used on buses and trucks. 

India's processed food exporters are trying to reach out to US retail chains like Walmart.

Indian pharmaceutical companies - especially raw material suppliers - are seeking to fill in the space Chinese suppliers might vacate due to higher costs. 

A whole range of rubber items - hoses, pipes, rubber mats from India will now become more attractive for US importers. 

Apparels and textiles, leather products, machine tools, processed foods such as jams, marmalades and jellies, the products.

The US government announcing a 10 per cent tariff covering new commodities in August 2019 imported from China can boost India’s gem and jewellery industry.

And to China?

The retaliatory tariffs imposed by China against US are also resulting in export opportunities for Indian players in China. With their trade relations with US getting sour, Chinese are looking at Indian generic drug firms more closely.

India is also talking to China to facilitate the exports of agri-produce including meat and meat products by streamlining favourable regulations.

Are there some opportunities that India missed?

The rift between the two big economies also provides an opportune moment to aggressively woo investors into India as they seek relocation from China, before they are allured by others. A number of industries have already shifted to Thailand and Vietnam, but not to India. 

What is the difficulty?

India is also trying to take advantage but one of the most damaging aspects of the trade war is the uncertainty and unpredictability it has introduced into the trade system and business decision-making: there is no clarity if the tariffs will be removed they’ll be further escalated.