US-China trade war could help and hurt India

Syllabus : GS 2/IR

In News

US President has directed his Trade Representative to increase tariffs on USD 18 billion of imports from China to ‘protect’ American workers and businesses

US stand 

• It has proposed sharp increases in tariffs on certain steel and aluminium products, semiconductors, electric vehicles, lithium-ion batteries, solar cells, ship-to-shore cranes and medical consumables.
  • The proposed increases are a part of the US’s broader strategy under Section 301 of the Trade Act of 1974.
• The reasons cited by the US include China’s unfair practices relating to technology transfer, intellectual property and innovation and the threats posed by large manufacturing capacities.
• China is also flooding global markets with artificially low-priced exports. 
• All these impact the American businesses and workers negatively .

China’s Response 

• Chinese officials have fiercely promised to retaliate, stressing that this will seriously affect bilateral cooperation with the US.

Impact on Global Economy 

• The trade war between the U.S. and China could hurt the economic prospects across the developing countries . 
• The trade war can have a direct impact on consumer products.
• The companies may find it difficult to operate with huge taxes and in response to that these will increase their product prices which will put a burden on consumers when they buy any products
• A trade war could weaken investment, depress spending, unsettle financial markets and slow the global economy. 
• It could also result in other countries raising protectionist barriers.

Repercussions for India 

• the positives : Indian exporters need to make the most of opportunities created by the trade war.
  • Exporters of face masks, syringes and needles, medical gloves and natural graphite are the best places to benefit from the recent round of tariff hikes by the US. 
  • While China is the biggest exporter to the US in these categories, India too has a good presence in the US in these products.
  • The United States and China are major trade partners of India in international business and can fulfill the huge gap of trade deficit through export.
  • India can seek more opportunities in the enhancement of information and communication technology, eCommerce, the chemical industry, outsourcing, and the automotive sector.
• Negatives 
  • Indian authorities need to up the ante in checking dumping of low-priced Chinese goods diverted into India, which can negatively impact Indian manufacturing. 
  • With the EU contemplating increasing duties on EV imports from China, there is risk of the latter pushing cheap EVs into India, deterring Indian businesses. 
  • Products slapped with higher US duties such as lithium ion batteries and semiconductors from China could also be diverted to India.
    • China is already India’s biggest trading partner, with India’s imports from that country totalling $101.7 billion in FY24.

Safeguards Available in India 

• India has a process for identifying imports which are priced lower than the selling price in the country of origin with the Directorate General of Trade Remedies levying anti-dumping duty on such products.
  • But there is delay in accessing and analysing the trade data and taking action. 

Conclusion and Way Forward 

• A recent announcement by the US of an increase in tariffs on a range of imports from China  could have repercussions on global trade 
• Therefore the commerce ministry’s investigation arm Directorate General of Trade Remedies (DGTR) has to remain vigilant

• The Centre could consider setting up a department to analyse the trade data on some key imports daily so that action can be expedited. 
• A trade policy with China that bolsters rather than impairs India’s recent manufacturing boost deserves attention — especially given India’s keenness to be a ‘China plus one’ hub.