Gauging India-China’s trade relationships amid US-China trade war

With US tariff war, are there chances of Asia’s superpowers such as India & China uniting to fight the demon? It’s a tricky question indeed going by trade stats, the US buys more from China than India: 22 per cent of its imports come from China, 2.1 per cent from India. About 19 per cent of China’s exports go to the US and 16 per cent of India’s. On the whole, India could be affected less by the trade war than China.

On positive fallout of the ongoing turmoil between China and the US, is that Beijing has lowered duties on many Indian imports and removed them for 28 drugs, including anti-cancer drugs. As a favour, India has removed tariffs on over 3,000 goods from China and other Asian countries. Trade experts and Chinese officials say this progress, reflected in its Belt and Road Initiative (BRI) and its interest in upgrading India’s poor infrastructure would result in massive opportunities for India. The China-initiated Asian Infrastructure Investment Bank has in the past two years given India nearly 30 per cent of its funds, most of which were allocated for infrastructure development in electricity and transportation.

India’s positioning

With China imposing tariff barriers on US products, Indian exports to China is expected to boom. Statistics have another story to tell, India’s imports (USD 61 billion) from China were six times its exports (USD 10 billion) in 2016-17, and its trade deficit with China increased more than two-fold from USD 16 billion in 2007-08 to USD 51 billion in 2016. Moreover, restrictions on market access in China and the lack of manufacturing capability in some technology items indicate that India may not be able to export much more technology to China and benefit much from a US-China trade war. Cotton has been one of India’s leading exports to China, which is the largest market for India’s cotton yarn. But Vietnamese cotton is posing a great threat in India’s journey by reducing exports to almost half from USD 2.2 billion in 2013 to USD 1.1 billion in 2016. This amounted to a decline of 67 per cent since 2011-12.


Besides this, India has not yet shown keenness to support or join China’s Belt and Road Initiative (BRI). And it is concerned about China’s ambitious global infrastructure plans, which have borne fruit in projects in the Indian Ocean. The BRI projects include the building of ports and roads from Myanmar to Sri Lanka and Pakistan. For India, the USD 60 billion China-Pakistan Economic Corridor, which runs through the disputed Pakistani-occupied Kashmir, is the biggest roadblock in being associated to the project.

Amid all these political and economic tensions, it seems unlikely that India will gain major impetus in its exports from the US-China trade war. While it might be true that Trump’s trade war can prompt India and China to search for a common ground, but a big question mark surrounds over the chances of real improvement in their bilateral trade and political ties.