US-China trade war holds a vast potential for India

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Updated: July 9, 2019 7:48:35 AM

The Department of Commerce has identified 774 product lines in which China’s imports from the US as well as India’s exports to the world are substantial

us, china, us china deal, us china relations, donald trump china, us china india, us india trade, us tariff india, US China trade war, India, export boost, 354 items,China, commerceOf these, 151 lines are where India has a high probability to replace US exports to China, since India already has market access and is currently a competitor to the US. (Reuters)

The ongoing tariff war has the makings of a new Cold War, this time between the US and its new adversary, China. Wary of the growing economic clout that China has created over the decades, Donald Trump is trying his best to cut it down to size, in the process hurting America’s own economy.

However, this Sino-US trade war, which may bring about a long-lasting shift in global trading patterns, holds a vast potential for India. Firstly, to take up exports of goods and services to China in the lines that the US may increasingly find itself priced out, with India having a strong potential for stepping into the void. Secondly, to take up exports to the US of such Chinese goods that the new US tariff wall has made expensive. Thirdly, to lay the red carpet for US entities in China—which Trump is now persuading to move out—to set up base in India, creating much-needed jobs.

A study by the Department of Commerce identified 774 product lines in which China’s imports from the US as well as India’s exports to the world are substantial.

Of these, 151 lines are where India has a high probability to replace US exports to China, since India already has market access and is currently a competitor to the US. Of these, 47 lines are those where India has an outright advantage over the US, with copper ores and concentrates, p-Xylene saturated monohydric alcohols, heterocyclic compounds with nitrogen hetero-atom, additives for lubricating oils, granite (rough or trimmed), invertors, etc.

Moreover, of the 774 lines, India’s current exports to China are a measly $2 billion, while its exports to the world are a whopping $32.8 billion, and could comfortably replace American exports of $20.4 billion to China.

Furthermore, there are 709 lines in which India’s exports to the world are substantial, but China’s imports from the US are only $159 million.

Though no market space has been vacated by the US in China as yet, India can wait and watch. Here, currently, India’s exports to the world are $30.2 billion and to China alone are only $667 million. Similarly, there are opportunities for India hiking its exports to American markets on account of the US imposing high tariffs on Chinese goods. In fact, 531 lines have been identified in which American imports from China and India’s exports to the world are significant.

Of these, 203 lines have been identified in which India has the potential to replace Chinese exports to the US as it has market access and is currently a competitor to China in the US market. Sacks and bags of polymers, industrial valves, vulcanised rubber, carbon or graphite electrodes, and natural honey are some of the top items in this list.

The US imports $30.6 billion worth of goods from China and while India’s exports to the world are about $22.2 billion, its exports to the US are a mere $2.4 billion.

In the ongoing trade war, the first salvo was fired by Trump when he opened a formal investigation into attacks on intellectual property of the US and its allies in August 2017. The second was fired in early 2018 when the US hiked tariffs on some of the major products supplied by China, with another list being put forth in March the same year, which imposed 25% tariff on some products including steel and aluminium imports from China.

Quick to respond, China imposed retaliatory tariffs on 128 American products including politically-sensitive agriculture products and automobiles. A second list of 108 items with 25% tariff was put forth, and the third list of 114 American goods brought out by China includes crude oil, diesel, magnetic resonance imaging kits, etc.

As matters stand, since May 10, 2019, tariff rates by the US imposed on $200 billion worth of Chinese goods have been increased from 10% to 25%, while China has proudly listed 2,493 items of American goods attracting 25% tariff, 1,078 items (20% tariff), 974 items (10% tariff), and 595 items (5% tariff).

(The author is former member, Railway Board)

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