How US-China trade war can boost India’s export prospects – Firstpost

The US-China trade war, which was reignited by former President Donald Trump’s aggressive tariff policies, has shaken global supply chains. The US has now raised the tariffs on China to 245 per cent after Beijing took a confrontational stance. Tariffs have already hurt Beijing in 2024 and could significantly cut its $440 billion in annual exports to the US.

As China rushes to get rid of excess inventory, India, Asia’s third-largest economy, finds itself in a precarious position. Unbeknownst to it, the tariffs have provided India with an opportunity to reconsider its trade strategy, expand its export market, and lessen the risk of becoming a Chinese dumping ground.

India has latent potential in labour-intensive Chinese industries like electronics, textiles, and machinery, which are the focus of US tariffs. China’s dwindling access to the American market, particularly in manufacturing, could be filled by India. Even though India’s IT and pharmaceutical industries are already well-established in the US, it now appears possible to increase exports of engineering products, clothing, and leather goods. India’s textile exports to the US, for example, increased by 8 per cent in 2023, indicating early traction.

But there are still obstacles in the form of India’s disjointed supply chains, complicated labour laws, and infrastructure bottlenecks. New Delhi needs to speed up reforms under its Production-Linked Incentive (PLI) programmes, which are designed to increase domestic manufacturing, to reap the benefits.

Even though the US market offers short-term gains, India’s long-term resilience depends on diversifying its export destinations. India is now searching for markets in ASEAN, Africa, and the Middle East after previously depending on the US and EU. The $131 billion in bilateral trade with ASEAN in 2023 is dwarfed by China’s $722 billion influence in the region.

This change is reflected in India’s recent trade agreements with the UAE and Australia as well as ongoing talks with the UK and EU. Regional trade barriers, which currently average 15–20 per cent tariffs among SAARC nations, could be decreased by fortifying ties with South Asian neighbours, such as Bangladesh and Sri Lanka, through programmes like the South Asia Subregional Economic Cooperation (SASEC).

China may oversupply other markets with low-cost goods as its export engine sputters. India is at risk because of its large consumer base. Electronics and machinery accounted for the majority of China’s $101 billion in imports to India in 2023. Unchecked dumping could undermine domestic industries, as demonstrated in the solar panel industry in India, where Chinese imports account for 80 per cent of the market, even though certain inputs help Indian manufacturing.

India needs to strengthen quality controls and anti-dumping laws in order to lessen this, as well as capitalise on its “China+1” appeal to multinational corporations moving their supply chains. In addition, increasing exports to Southeast Asia and Africa, where there is a growing need for reasonably priced goods, can reduce import risks.

The vulnerability of an over-reliance on single markets is highlighted by Trump’s tariff war. India must act quickly to take advantage of openings in the US market and strengthen its connections throughout Asia and beyond. India cannot afford the risk of becoming a collateral casualty of China’s export glut. Strategic diversification is not only wise but also essential as the world’s trade breaks up into blocs.

The writer is a columnist. His articles have appeared in various publications like The Independent, The Globe and Mail, South China Morning Post, The Straits Times, etc. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.