A recent announcement by the US of an increase in tariffs on a range of imports from China, worth $18 billion, could ratchet up the simmering trade war between the two countries. The Biden administration 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 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.

The impact of these hikes may not be too material on US, since these imports account for just 4 per cent of the country’s total imports from China. But there could be repercussions on global trade as the impacted Chinese goods flow to other countries. If there are retaliatory tariff hikes by China and if this spirals into a trade war as it did in 2018 under Donald Trump, other countries, including India, will be faced with both positive and negative effects.

First 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 placed to benefit from the recent round of tariff hikes by the US. While China is the biggest exporter to US in these categories, India too has a good presence in the US in these products. With regard to the possible adverse effects, Indian authorities need to up the ante in checking dumping of low-priced Chinese goods diverted into India, which can negatively impact Indian manufacturing. It has been observed that tariff hikes in 2018 did not lead to a reduction in China’s exports; they only went to other destinations, or through third countries into the US. The tariff hike by the US is highest on electric vehicles, from 25 per cent to 100 per cent. With the EU too contemplating increasing duties on EV imports from China, there is risk of the latter pushing cheap EVs into India, deterring Indian businesses. Whether this warrants a review of India’s EV policy is worth considering. 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.

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. 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.

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