Photo: Mint
Photo: Mint

India sees opportunity in escalating US-China trade war

The commerce ministry is currently consulting various councils to shortlist items for export

New Delhi:India has spotted an opportunity to boost its exports with the second round of tariff hikes by the Donald Trump administration on $200 billion of Chinese imports putting the US at a disadvantage.

The commerce ministry is currently consulting various export councils to shortlist items, especially in sectors such as chemicals, pharmaceuticals and electrical parts, where India could have a comparative advantage.

“There are a lot of items that we need to identify and push for them. We are talking to our exporters through the export promotion councils and pushing them to increase exports to the US," a commerce ministry official said, requesting anonymity.

The 10% tariff hike on Chinese goods came into effect on Monday, and is expected to go up to 25% at the end of 2018, given Beijing’s retaliatory moves. The two sides have already slapped tariffs on $50 billion worth of imports from either side.

India is looking for ways to boost exports and cut non-essential imports in the backdrop of its current account deficit (CAD) touching 2.4% in the June quarter and the sharp depreciation of the rupee.

The official cited above said that even if India has not been exporting some items to the US at present because of its cost disadvantage vis-à-vis Chinese products, it can start exporting them after the recent tariff hikes, which give it an edge.

“There are items such as electricity parts and switches which small-scale industries produce in India. We have become cost-competitive in such items, but we don’t have the production capacity. Nobody would like to expand capacity through fresh investments, as we don’t know how long these sanctions will last."

India’s trade surplus of $21 billion with the US has often attrac-ted the ire of US President Trump, who claims India follows discriminatory trade practices against US exports. Trump on Friday said he wants to stop the subsidies that growing economies like India and China have been receiving as he wants the US, “a developing nation", to grow faster than any other.

 Last week, India had deferred tit-for-tat tariffs for the third time against 29 Ame-rican products worth $235 million by 45 days. The move was considered to counter the US’s move to unilaterally raise import duties on Indian steel and aluminium products. India and the US are now engaged in finalizing a trade package to ease tensions.

India’s exports of steel items to the US fell 42% in the June quarter, while its aluminium items exports to the US, facing similar sanctions, jumped 59%, Mint reported on 3 September.

The US Trade Representative is reviewing India’s eligibility for the generalized system of preferences (GSP), after the US dairy and medical device industries requested a review of India’s GSP benefits, given its alleged trade barriers affecting US exports in these sectors.

The GSP programme allows duty-free entry of 1,937 products worth $5.6 billion from India into the US, benefiting exporters of textiles, engineering, gems and jewellery, and chemicals. The US has been trying to leverage the GSP review to gain more market access in India.

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