In U.S.-China trade war, U.S. exports to China have been subject to China’s retaliatory tariff sanctions, resulting in a decline in competitiveness. If India can seize the opportunity at this time, strengthen its exports to China and grasp the Chinese commodity market share after the withdrawal of the United States, it is expected to become the main beneficiary of this trade war.
After the United States launched a trade war with China, China imposed 15%-25% retaliatory tariffs on U.S. goods, and imposed only 5%-10% normal tariffs on other countries. In addition, according to the Asia-Pacific Trade Agreement (APTA) revised in 2005, India’s exports to China can also enjoy an additional 6%-35% duty concessions, which makes India’s exports to China more competitive.
Indian exports are particularly interested in the products with overlapping US exports to China. Fresh grape, cotton, flue-cured tobacco, lubricating oil, and chemical products such as benzene are important items of U.S. exports to China with the value of $10 million, and India also has been exporting these goods to China. An Indian official said that India is expected to expand the scale of exports of these goods. If India’s exports to China can seize the U.S. market in China, it will hope to reduce the trade deficit of about 63 billion US dollars between China and India.
Take corn as an example: India exported $143.6 million worth of the goods to the world in 2017-2018, while China imported $600 million of it during the same period. At a time when the United States is paying a 25% tariff to China, the APTA country, India, can get a 100% discount on corn exports to China.
China has recently started buying soybeans from Brazil. Earlier, due to increased trade tension between the two countries, China imposed a 25% tariff on soybeans imported from the United States. If the two countries stop buying from each other, similar products from other places will become more attractive.
The South Asian country has identified more than 100 products, including oranges, almonds, walnuts, durum wheat, corn and grain sorghum, which are beneficial to replace or occupy U.S. trade market share in China. Although India has strong export capabilities on these commodities, some of these commodities still face market access problems in China.
Amitendu Palit, a senior researcher at the Institute of South Asian Studies, National University of Singapore, bluntly stated that one of the main influences of the US trade war against China is to reshape the global supply chain, India may become part of some production chains. But it is too early to say that India will benefit from the U.S.-China trade war.