New Delhi: The US-China trade war, which began in 2018 under then-President Donald Trump, has significantly changed global trade patterns. While India benefited from the shifting trade landscape, countries like Mexico, Canada, and the ASEAN bloc gained much more, according to a report by economic think tank GTRI.
India’s Export Growth Amid Challenges
India’s exports to the US increased by $36.8 billion during the trade war, driven by sectors like electronics, pharmaceuticals, and engineering goods. However, this growth pales in comparison to Mexico, which emerged as the biggest winner with an export increase of $164.3 billion. Canada followed with $124 billion, and ASEAN nations collectively accounted for a significant share of the trade shift.
Electronics and telecom equipment played a significant role in India’s export growth, contributing $6.2 billion, or 17.2% of the total increase. Pharmaceutical products like medicines added $4.5 billion, while petroleum oils and solar cells contributed $2.5 billion and $1.9 billion, respectively.
Despite this growth, the report highlights a critical challenge: India’s heavy reliance on imported inputs for its exports. For instance, most smartphone components, solar cell materials, and pharmaceutical raw materials (APIs) are imported, particularly from China.
Strengthening India’s Local Supply Chains
To reduce dependency on China and enhance its competitiveness, India needs to focus on strengthening local supply chains and producing critical intermediates domestically. This would improve cost efficiency and make Indian exports more attractive in global markets.
The GTRI report emphasizes the importance of increasing local value addition in exports. By doing so, India can not only boost its economic resilience but also position itself as a reliable trade partner for the US and other countries.
Opportunities Under a New Trade Landscape
With Donald Trump potentially returning as US President, the global trade environment could see further shifts. Trump has already hinted at imposing new tariffs targeting countries like Mexico, Canada, and China. This evolving scenario presents significant opportunities for Indian industries to increase their exports to the US.
However, to fully capitalize on these opportunities, India must improve its ease of doing business and focus on cost efficiency. These steps will help domestic industries compete effectively on the global stage.
Recommendations for the US
The GTRI report also suggests that the US should limit the use of Chinese inputs in products exported to the country. By revising non-preferential rules of origin, the US could reduce its reliance on Chinese goods more effectively than by simply imposing higher tariffs.
While India has made notable progress in increasing its exports to the US during the trade war, there is still much work to be done. Strengthening local supply chains, reducing dependency on imports, and improving cost efficiency are critical steps for India to maximize its gains in the global trade arena. By addressing these challenges, India can position itself as a stronger player in the evolving trade landscape and compete more effectively with nations like Mexico, Canada, and ASEAN.
