India Poised to Gain From US-China Trade War 2.0: Experts
16:22 04.03.2025 (Updated: 18:22 04.03.2025)
© AP Photo / Rajesh Kumar Singh
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A new global trade war began on Tuesday as US President Trump’s 25% tariffs on Canada and Mexico, and additional 10% tariffs on China took effect. This and retaliatory tariffs from China and Canada caused uncertainty and wiped billions from global markets.
Despite the ongoing slump in Indian capital markets which is a direct result of United States President Donald Trump's trade policies, India is relatively well-placed to benefit from the US-China tariff war, experts have told Sputnik India.
"India is in a much better position to tackle and take advantage of the trade war than during the first Trump term. While there was a marginal increase in Indian exports back then, India's broad policy was more about inaction, or not reacting much," Professor Debashis Chakraborty, an academic at Indian Institute of Foreign Trade (IIFT), told Sputnik India.
He highlighted that the Prime Minister Narendra Modi's Make in India initiative, which seeks to transform the country into a global manufacturing hub, had started to mature and should be built upon further.
According to Commerce Ministry data for Financial Year 2023-24, India's exports hit a record high of $778.21 billion. Chakraborty also noted that India had launched the Atmanirbhar Bharat after the first Trump presidency, during the COVID pandemic in 2020. The policy offers a slew of incentives to boost domestic production.
"India is better prepared this time", Chakraborty remarked, stressing that India had gained marginally from the US-China trade war under the first Trump presidency.
The US ranks as India's largest export market, leading in sector such as gems and jewellery, pharmaceuticals, refined crude products, electronics, engineering goods, apparels and agricultural products, according to trade data.
The expert suggested that the most important factors which would make Indian exports globally competitive were developing mass production capabilities, improving cost-effectiveness and product quality.
He noted that China, the world's biggest exporter, had followed a similar approach to reach the pole position in global supply chains.
"The general sense is if these tariffs focus more on China than others, then there should be opportunities for countries like India and Vietnam. However, if we look at the case of a relatively lower-cost economy such as Vietnam, then it has the cost advantage over India and is in a much better position to take advantage of the US-China trade war," Chakraborty explained.
We might have an advantage in certain product lines, but on the whole, India doesn't really have a cost-advantage at present to exploit opportunities from the tariff war, the Indian expert added.
Further, Chakraborty asserted that a prospective free trade agreement (FTA) between India and the US could help Indian exports reap benefits from US-China tariff wars. In fact, India's Commerce and Industry Minister Piyush Goyal has flown to the US to hold FTA talks with US Trade Representative (USTR) Jamieson Greer and US Commerce Secretary Howard Lutnick.
Both US and India are looking to negotiate the first tranche of the FTA by autumn and have set a $500 billion trade target, as announced by PM Modi and President Trump at a joint presser at the White House last month.
In the wake of Trump's tariff threats against India, it has already reduced duties on a range of products, Chakraborty highlighted. For instance, India slashed import duty on US bourbon imports by 50% last month, with Goyal at the time suggesting that more tariff cuts could follow in coming months under a bilateral trade deal.
During the Union Budget presentation last month, Finance Minister Nirmala Sitharaman announced duty cuts on high-end motorcycles, cars, and smartphone parts, a move likely to benefit US companies.
Additionally, India has indicated that it could step up its energy imports from the US to $25 billion from $15 billion at present, which is being looked as means to address Trump's concerns around trade deficit with the South Asian economy.
However, despite the apparent concessions made by India, Chakraborty reasoned that Indian policy-makers could face significant challenges if Trump "shifts the goal posts".
Trump has also announced duties on agricultural imports from next month, which could have implications for Indian exporters.
Commenting on the global tariff war, former Indian diplomat Ambassador Anil Trigunayat remarked that major global powers were well aware of President Trump's tendency to fall back on tariffs as an "effective instrument".
"India also understands Trump's affection and recourse to trade and tariffs pretty well. I am sure going forward a way will be found through a mutually beneficial agreement or arrangement which will be reciprocal in nature. Setting a $500 billion trade target indicates that things are moving in that direction," Trigunayat concluded.
