Will trade war lead to import surge in India? | Explained Premium

India fears re-routing of exports due to U.S.-China tariffs, prompting concerns about potential surge in imports.

The story so far: U.S. President Donald Trump’s ‘liberation day’ tariffs and China’s retaliatory tariffs have induced fears in India about impacted countries re-routing their exports to the large consumer market. Reports say the Ministry of Commerce and Industry is wary of any potential surge in imports of farm produce from the U.S. and manufactured goods from China, Vietnam and Indonesia, among other countries.

With President Trump’s tariff regime making it difficult for countries to sell in the U.S., they may potentially look to India’s large consumer market to dispose of their goods. This is especially true of goods which are either being extensively produced in their factories beyond their domestic consumption or are of considerable importance to their overall economic and/or export ambitions.

In light of the present circumstances, two noteworthy examples, where this dynamic may play out entail Bangladesh’s readymade garments and textile industry and Indonesia’s electronic equipment industry. The former is the world’s second largest garment manufacturer, with the sector accounting for 80% of its exports. Indonesia’s electronics industry has been a key driver of their economic growth and employment, according to the International Labour Organisation (ILO). Now with increased tariffs, the countries could be in for a potential lookout for alternative markets to sell their products.

According to observers, China too could be looking for avenues to deal with its manufacturing overcapacity. The World Trade Organization (WTO)’s trade review of China, published in July last year, inferred it to have grown into a “major global manufacturing hub in recent decades”. It attributed this to abundant and productive labour, high-quality infrastructure alongside trade and investment liberalisation, among other factors. However, member countries felt that the subsidies accorded by the Chinese government, particularly to state-owned enterprises, “distorted global markets and promoted overcapacity”. The WTO observed in the review that manufactured goods accounted for over 95% of China’s exports. In March, data from Chinese Customs pointed to the U.S. as its biggest export destination. However, now Beijing may be looking towards other markets.

This is one arena where the tariff threat may have a potential reverse effect on Washington with repercussions for India as well. According to the U.S. Department of Agriculture, China was the third largest export destination for their agricultural products. Exports, however, declined 15% on a year-over-year basis in 2024 to $24.7 billion because of “rising competition” to U.S. soyabean and corn from South America. Considering Beijing’s retaliatory tariff on the U.S., the North American country’s produce, especially soyabean and corn, could also seek a market in India.

According to Ajay Srivastava, founder of the think-tank Global Trade Research Initiative (GTRI), sectors at most risk include chemicals, steel, aluminium, textiles, plastics, rubber, electronics and consumer goods. Several of these are already under investigation with the Directorate General of Trade Remedies (DGTR).

An important example is the domestic steel sector where sentiments have been marred because of dumping-induced downward revision in prices. Preliminary findings of the anti-dumping investigation, published in March, attributed “trade diversion due to protective measures” imposed by the U.S. and EU (starting 2018) as the “major cause” for surge in imports of certain steel products. The DGTR reasoned that large steel producing economies such as Japan, South Korea and China held high steel producing capacities that exceeded their domestic consumption. Thus, to curb the spike in imports, the DGTR recommended imposing a provisional safeguard duty of 12% for 200 days in March. In the chemical sector, the DGTR concluded earlier this year that China was dumping titanium oxide, used in cosmetics and paints, into the country and “injuring the domestic sector”.