Escalating US-China Trade Tensions and Implications for India

Amid rising trade tensions, China announced a 34% duty on all US imports in response to US tariffs imposed by US President. The Ministry of Commerce and Industry in India held a high-level meeting to assess the potential surge in imports resulting from these reciprocal tariffs, set to take effect on April 9.

Context of Tariffs

• The US imposed a 34% reciprocal tariff on Chinese goods, following an earlier 20% tariff.
• Concerns are raised about a glut in Chinese exports due to overcapacity.
• The 34% tariff poses a challenge for US agricultural products entering China.

Opportunities for Other Exporters

Experts suggest this situation could benefit other exporters like Australia and Brazil, allowing them to increase their market share in China.

India's Response and Concerns

• Exporters, particularly steel manufacturers, raised concerns over the US's 25% tariffs on steel and aluminum.
• The Commerce and Industry Ministry recommended a 12% safeguard duty on steel to the Finance Ministry.
• India opts for negotiations with the US instead of a retaliatory approach.
• Economists express concerns about an influx of Chinese exports to India, potentially hurting domestic manufacturing.

Sector-specific Impacts

• Electronics, Machinery, and Textiles: High risk of dumping and impact on domestic industries.
• The Indian government may impose anti-dumping duties to protect local industries.

Global Trade Dynamics

• The Lowy Institute notes a shift in trade patterns, with 80% of countries trading more with China than the US by 2023.
• The US increased imports from countries like Vietnam and Mexico as alternatives to China.

Strategic Considerations for India

• India advised to avoid entanglement in the US-China trade war.
• Potential risks if India alters tariffs or import policies, possibly triggering backlash from China.