New Dehli (Tamsil Shahezad Khan) - As global trade tensions intensify, economists and trade experts are raising alarms over a surge in Chinese exports that could destabilize India's domestic manufacturing. A recent report from HDFC Bank highlights the growing risks posed by the escalating US-China trade war, warning that India may be particularly vulnerable to the influx of cheaper Chinese goods.
Sakshi Gupta, Principal Economist at HDFC Bank, expressed concern that with US tariffs on Chinese products now exceeding 60 percent, a larger volume of Chinese supply is likely to flow into markets like India. "This makes domestic manufacturing in countries like India vulnerable to cheaper Chinese oversupply," Gupta stated, emphasizing the potential adverse effects on local industries.
The ripple effects of US tariffs are also expected to affect Indian sectors such as electronics, machinery, and textiles, with Crisil Ratings noting that Chinese exporters may redirect shipments to India as part of their broader strategy to diversify into new markets. This shift could lead to a glut of Chinese exports in India, potentially undermining local production and placing additional strain on Indian manufacturers. "The influx of Chinese goods, especially in areas like electronics and textiles, could harm domestic industries," Crisil Ratings warned, though it also noted that the Indian government could respond with anti-dumping measures to protect local businesses.
Meanwhile, global trade trends are evolving as the US continues to shift its import patterns. A research paper by the Lowy Institute revealed that while about 80 percent of countries traded more with China than with the US in 2023, the US remains a dominant force in global demand. This has led to an increase in imports from countries like Vietnam and Mexico, which are benefiting from the tariff reorientations initiated under the Trump administration.
Former trade officer Ajay Srivastava, who leads the Global Trade Research Initiative (GTRI), suggested that India must tread carefully as the US-China trade war deepens. With both nations imposing substantial tariffs on each other, Srivastava warned of potential disruptions in the global commodity market, particularly concerning US exports like soybeans and corn, which China imports heavily.
In response to these shifting dynamics, India’s trade policies may face further scrutiny. The United States Trade Representative (USTR) recently pointed out India's restrictions on ethanol imports, which could affect trade negotiations. Should India choose to relax tariffs or permit the import of US corn for ethanol production, it risks angering China, potentially resulting in a backlash that could include halting critical exports such as electronics and machinery.
As India navigates these complex global trade shifts, the government's strategic decisions will be crucial in balancing its relations with both China and the US, all while safeguarding its own domestic industries from external pressures.
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