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Informist, Tuesday, May 13, 2025

 

By Krity Ambey

 

NEW DELHI – After a brief period of competitive advantage over Chinese goods, Indian exporters may have to brace for intense competition again, as Beijing and Washington agreed to suspend tariffs for 90 days. Latest discussions between the US and China have put the traiff war to rest, with the former commmitting to cut the extra duty on Chinese goods to 30% from 145%, and the latter agreeing to cut duty to 10% from 125% for 90 days. 

 

Indian exporters, whose goods attracted an extra 10% duty in the US starting Apr. 2, enjoyed a competitive advantage for little over a month against China due to the massive tariff arbitrage of over 100%. During the period, China+1 strategy gained prominence, with businesses exploring capacity expansion in other Asian countries like Vietnam, Malaysia, India--where they could import input from China, do the value-addition and then bring to the US at lower duty, Founder of think-tank Global Trade Research Initiative Ajay Srivastava said.

 

Now the tariff arbitrage is set to come down to about 20%, and there is also a significant uncertainty now. "Who knows the US may further cut duty for China to 10% now...Earlier it seemed like the 145% duty on Chinese goods is likely to stay," Srivastava said. "It was a big moment for China+1 in the past month. Now that moment is almost over."    

 

The latest commitments by the US and China may also intensify competition for Indian exporters in markets like Southeast Asia, Africa, and Latin America, where India has recently made inroads capitalising on US-China trade disruptions, the Federation of Indian Export Organisations President S.C. Ralhan said. "The reduction in tariffs will likely result in a surge of US-China bilateral trade in high-value segments such as electronics, machinery, and chemicals."

 

Given the evolving global trade landscape, securing a trade deal with the US should be the strategic priority for India, according to Srivastava. The two sides have been engaged in negotiations for a trade pact since February. 

 

The trade agreement is New Delhi's hope to avoid Washington's proposed reciprocal tariffs of 26% on Indian goods, likely to be effected in July. The reciprocal duty by Washington could significantly affect India's exports growth as the US is the top destination for Indian exporters.

 

India had a bilateral trade of $118.00 billion with the US in Apr-Feb, which included exports worth $76.36 billion, according to latest data available with the commerce ministry.  End

 

US$1 = INR 85.33

 

Edited by Akul Nishant Akhoury

 

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