India was the fourth-largest beneficiary of the trade diversion following the US-China trade war initiated by US President Donald Trump during his first term, and domestic exporters could experience a similar boom as a fresh trade war erupts between the two largest economies, a senior government official has said.
The US tariff war with China escalated as Beijing on Tuesday retaliated against the 10 per cent US tariff by announcing 15 per cent levies on coal and liquefied natural gas, as well as 10 per cent on oil and agricultural equipment from the US. China also announced it would investigate US tech giant Google for alleged antitrust violations.
“Early indications from exporters suggest that traders in India are receiving higher orders amid fears that tariffs will rise in China. A similar tariff war previously helped India increase exports, as it became the fourth-largest beneficiary of the trade diversion away from China following the tariff war,” an official said.
A report from Oxford Economics last year on the effects of the US-China trade war during Trump’s first term noted that US trade rerouting had been particularly pronounced in the large electronics market, where China’s share had plummeted by 19 percentage points since 2017. “India’s share in US electronics imports has risen nearly tenfold since then, reaching 2.1 per cent. Electronics now also account for a greater share of India’s overall exports, meaning the government’s ongoing efforts to become a high-tech powerhouse appear to have partly paid off,” the report stated.
However, the report added that despite this remarkable catch-up, India remains far behind its Asian peers in terms of competitiveness and, consequently, market share.
“India mainly supplies telecommunications equipment—such as Apple ramping up its iPhone production in India, which accounted for nearly two-thirds of all electronics exports in 2023. More advanced electronics, such as semiconductors, are supplied by Korea and Taiwan. Moreover, China itself remains a significant supplier, accounting for 27 per cent of total US electronics imports in 2023,” the report said.
To better capture the trade diversion this time around, the government has reduced basic customs duties on a number of items. But has kept the effective rates on a range of items the same indicating a cut in cess moving forward.
The government’s decision in the Union Budget to lower import tariffs on various goods is a deliberate move to rationalise India’s trade tariffs, which had faced criticism—most notably from US President Donald Trump—for being too high, Finance Secretary Tuhin Kanta Pandey told The Indian Express.