India’s finance minister sees a host of opportunities from the US-China trade war

• Earlier this week, the US government’s 10% duty on $200 billion worth of Chinese imports came into effect.
  
• As a result of the increased tensions, the World Trade Organisation (WTO) reduced its estimate for the growth in global trade in 2018 to 3.9% from 4.4%.
  
• However, amid this climate of apprehension, the Finance Minister of India, Arun Jaitley, thinks that despite the initial instability, the US-China trade war could allow India to be a more competitive trading and manufacturing base.
  
  

Earlier this week, the US government’s 10% duty on $200 billion worth of Chinese imports came into effect. This was on top of tariffs that the Trump administration imposed on $50 billion worth of Chinese goods in August. The move has sparked legitimate fears of a trade war between the two countries as China is expected to retaliate in kind.

As a result of the increased tensions, the World Trade Organisation (WTO) reduced its estimate for the growth in global trade in 2018 to 3.9% from 4.4%. It also predicted a further decline in trade growth to 3.7% in 2019. A reduction in trade will not only hurt the global economy, but could be harmful for developing countries, which rely on export-led growth.

However, amid this climate of apprehension, the Finance Minister of India, Arun Jaitley, thinks that despite the initial instability, the US-China trade war could herald a lot of benefits for the country. In an address to the PHD Chamber of Commerce today, Jaitley said that the conflict could allow India to be a more competitive trading and manufacturing base.

Jaitley echoes the claims of trade experts, who feel that India could step in and increase its exports of products like chemicals, auto parts, rubber and machinery to the US as Chinese imports become too expensive for American consumers. However, the government will keep tabs on its trade surplus with the US, which the Trump administration has expressed its dissatisfaction with.

Interestingly, the possibility also exists for India to go full-opportunist by using the trade war to increase exports to China. The US and India export a number of similar products to China such as fruits, lubricants and chemicals.

India’s ministry for commerce and industry is also reported to be assessing a plan to boost its exports to the US following the imposition of tariffs on Chinese goods. It is currently said to be in talks with business groups in the chemicals, pharmaceuticals and electrical equipment space to identify items that can receive a greater trade push.

The move aligns with the Indian government’s plan to reduce its current account deficit and stem the fall in the rupee by cutting imports of non-essential goods and increasing exports. Yesterday, the government decided to raise the import duty on 19 product categories such as household appliances, footwear and jewelry.