The Uneven Benefits of the US-China Trade War: Insights from the GTRI Report
In the rapidly changing landscape of global trade, the ten-nation Southeast Asian bloc, ASEAN, and Canada have emerged as unexpected beneficiaries of the US-China trade war, surpassing India in terms of economic gains. This revelation comes from a recent report by the Global Trade Research Initiative (GTRI), which highlights the necessity for India to bolster its local supply chains and reduce reliance on Chinese imports. With the prospect of Donald Trump’s return to the White House, it appears that the evolving trade dynamics might present fresh opportunities for Indian industries.
A Shift in Trade Dynamics
Initiated in 2018 under President Trump, the US-China trade war aimed to recalibrate economic power through tariffs targeting critical sectors. While the trade war significantly reshaped global trade flows, its initial goals remain largely unmet. Instead, the trade conflict inadvertently favored countries that were prepared to fill the gaps left by US imports from China. According to the GTRI report, Mexico, Canada, and ASEAN collectively accounted for 57% of the growth in US imports since the beginning of the trade war.
For India, the report indicates a mixed outcome. While exports to the US increased by $36.8 billion—primarily in the electronics, pharmaceuticals, and engineering sectors—the overall impact is considered less favorable compared to that seen in Mexico and Canada.
Key Beneficiaries of the Trade War
The data presented in the GTRI report is striking. Mexico emerged as the top winner, with an export increase of $164.3 billion to the US between 2017 and 2023. Canada followed closely with a $124 billion increase. ASEAN nations, particularly Vietnam, benefited substantially with a $70.5 billion jump. Other notable countries included South Korea ($46.3 billion) and Germany ($43 billion).
In comparison, India ranked sixth, with its $36.8 billion increase in exports signaling potential but also highlighting room for improvement. Key sectors driving this growth included electronics, pharmaceuticals, and the engineering sector, with specific contributions from smartphones, medicines, and petroleum oils.
Sectoral Insights: India’s Export Dynamics
Delving deeper into the specifics, the report indicates that smartphones and telecommunications equipment alone accounted for $6.2 billion—about 17.2% of India’s total export growth. Medicines contributed $4.5 billion, and petroleum oils and solar cells added $2.5 billion and $1.9 billion, respectively. While these figures reflect a significant rise, they also expose a concerning dependency on imported raw materials. For instance, a substantial portion of smartphone components, as well as Active Pharmaceutical Ingredients (APIs) used in medicines, are still sourced from China.
The GTRI underscores the pressing need for India to enhance local value addition in exports. Strengthening domestic production capabilities and fostering local supply chains will be instrumental in decreasing reliance on foreign imports and making Indian exports more competitive.
Strategic Recommendations for India
The report advocates for strategic policy changes to boost India’s standing in the global trade arena. The GTRI suggests that rather than imposing higher tariffs, the US government should limit the use of Chinese inputs in products exported to the US. This approach could provide a more effective means for countries, including India, to navigate the complex trade landscape.
With bilateral trade with the US exceeding $190 billion, India must seize the opportunity amidst potential policy shifts should Trump return to the presidency. The GTRI suggests that India could consider lowering import tariffs modestly, which could encourage increased trade without significantly compromising government revenue.
Conclusion: A Road Ahead for Indian Industries
The findings of the GTRI report paint a sobering picture of India’s position in the global trade environment in the aftermath of the US-China trade war. While India has benefited from the shift in trade patterns, the engagement levels do not match those achieved by Canada, Mexico, or ASEAN nations. To capitalize on the opportunities presented by shifting international trade dynamics, India must prioritize the enhancement of local manufacturing capabilities, greater ease of doing business, and increased investment in critical intermediates.
As the world watches the unfolding trade landscape closely, India stands at a crossroads, with the potential for significant economic growth waiting on the other side of strategic reforms and local empowerment.