The trade war between the world’s two most dominant economies has subtly yet steadfastly begun to influence global trade. This trade war imposed on China by President Trump may prove to be a winning bet for the Indian trade if India can play its cards right and maneuver deals in its favor.
With US exports forced to relinquish their hold on the Chinese market, owing to higher import duties levied on them, exploring Chinese markets could now be a bit easier for India. As suggested by the Ministry of Commerce, more than 100 products worth around $130 billion, that was being exported by US to China in the year 2017 can easily be substituted by Indian products. This may be an optimal opportunity for India to cover the trade deficit of over Rs.4 lakh crore (last year) with China.
Retaliatory tariff hikes by China and US may work in India’s favor
India has always faced tough competition from the US while exporting certain products such as chemicals, grapes, corn, lubricants, etc. to China. Even though both countries exported these products to China, it has always been the US who has dominated the China markets in these products.
Now, with the US being sidelined, having to bear the brunt of around 15-25% increase in import duties by China on these products, India can possibly take its place by leveraging its position as a member of the Asia Pacific Trade Agreement (APTA).
There are several products such as oranges, almonds, etc., which are exported by India to several countries, except China. Even though the demand for these products is high in China, Indian products have failed to capture the Chinese market as emphatically as the US. With the onset of a trade war between US and China, India should now gear up to garner a large market share of these products in China.
Higher tariffs on Chinese goods in the US market may open new opportunities for Indian goods to enter the US
India became less active in the US market regarding exports of certain products because China, the manufacturing hub of the world, was able to supply these products at a significantly lower price. Now that the retaliatory tariff hike game between USA and China is in full swing, India may find this to be an opportune time to enter the US market.
China and the US have been fighting their own battles in terms of tariff hikes, but other countries including India have also been drawn into this unfortunate affair, with US imposing tariffs on certain products imported from India. India has also taken due action against the US tariff hikes and has reportedly notified the World Trade Organization (WTO) about its plans to increase tariffs by over 50% on more than 30 product lines imported from US including motorcycles, chocolates, almonds, etc.
Long-term trade war is bad news
Donald Trump’s insistent efforts to prove the US economy as one of the most empowering, and considering all nations as potential threats have caused disruption among its several trading partners. Trump’s announcement of a tariff increases of 25% on steel and 10% on aluminum has shaken the European markets. They have retaliated by increasing the tariff against several US products. But in the long-term this retaliatory warfare doesn’t bode well for global trade. Professor Dani Rodrik, of the John F. Kennedy School of Government at Harvard University says, “If Europe, China, and other trade partners were to retaliate in response to Trump’s tariffs they would simply reduce their own gains from trade without reaping any of the advantages of protectionism. And they would be doing Trump a favor by lending surface plausibility to his complaints about the “unfairness” of other countries’ trade policies vis-à-vis the US. For the rest of the world, raising trade barriers would be a case of cutting off one’s nose to spite one’s face.”
India may get the benefit on the export front in the short-term,but if this war continues for a long time, its impact may seep in the Indian trade and affect it adversely. Indian markets incorporate imported goods majorly in their production. Thus, the tariff war is bound to be financially discomforting for the Indian producers.
And even though major economies may be able to face Trump’s decisions and its impact on the import-export front, retaliation from India may not go well with Trump. India may have to suffer on deals related to defense. Thus, India needs to tread on these grounds with steady steps.
The Dollar Business: Changing the trade game
If Indian businesses are looking to strengthen their exports, then they must diversify their product basket. Importers might prefer working with businesses that have a diversified product basket, as it will give more convenience to them. Working with multiple exporters will only demand more resources and manpower, which eventually adds cost.
The next area that an exporter must analyse is identifying the correct geography. Every product has a demand but in a specific market. Thus, to address such challenges exporter can now look up to The Dollar Business (TDB).
TDB is a multi-featured platform that is specific for foreign trade in India. One of its most powerful tools is EXIMAPS, which helps in buyer discovery and competition analysis. EXIMAPS is can conduct a product basket analysis, which will give an exporter a direction it needs. Another intriguing feature of TDB is World Market Analysis (WMA).
Using WMA, an exporter can select the country and can get in-depth insights into consumption patterns around the world. The business can also know the focus market and the opportunity and competition that lie in it. Thus, TDB is a complete package that a business can use to its maximum advantage for exports.