How the US-China Trade War Impacts India: Check the 5 Major Opportunities in Agriculture, Oil, and Manufacturing

The US-China trade war began in 2018. It was triggered by the-then US President Donald Trump. He believed that China had taken unfair advantage of global trade rules, which resulted in a trade deficit of $375 billion for the US. Also, Trump accused China of exploiting the World Trade Organization (WTO) framework by forcing US companies to transfer technology and trade secrets to gain market access.

To counter these practices, the US invoked Section 301 of the Trade Act of 1974. For those unaware, this section allows the president to impose penalties on trading partners engaged in unfair practices. Consequently, this trade war shook the global economy, with many countries, including India, being affected by the conflict between the world's two largest economies.

However, on the bright side, the US-China trade war presents several lucrative opportunities for India. Let’s check out the five major ways in which India can benefit from this trade war.

• Due to the US-China trade war, US companies are seeking alternatives to Chinese suppliers.
• India can expand exports to the US in sectors like textiles, auto parts, medical supplies, and defence machinery.
• The war is expected to lower global oil prices. This will reduce India’s energy costs and benefit industries by lowering their production costs.

Recently, the US has proposed significant “tariff increases” on $18 billion worth of Chinese imports that are focused on products like:

• Steel
• Semiconductors
• Electric vehicles, and
• Medical supplies

Additionally, China is accused of flooding global markets with artificially low-priced exports. This makes it difficult for American companies to compete. Now, if we talk about China’s stand, it has strongly opposed the US tariffs. The country has warned that such actions will severely damage bilateral relations between the two countries.

Moreover, Chinese officials have even claimed that the tariffs are an attempt to disturb their growing industries. They believe the US is using trade policy to curb China's economic rise by unfairly targeting key industries that are important to China’s economy. But, the US has justified its actions as necessary for economic protection.

The US-China trade war offers India several economic opportunities. With both the US and China imposing tariffs on each other’s products, India can fill the gaps created in global markets. These opportunities are available across various sectors like agriculture, manufacturing, and energy. Let’s understand in detail:

1. Increase exports to the US

As the US imposes tariffs on Chinese imports, American companies will now seek alternative suppliers. India can increase its exports to the US in sectors like:

• Textiles
• Garments
• Auto parts
• Defence machinery

With items such as military aircraft parts and passenger vehicles already being exported to the US, India can further capitalise on this opportunity to strengthen its position in these markets.

2. Expansion in China’s market

China is reducing tariffs on imports from countries like India. This creates an opportunity for India to replace US goods in Chinese markets. Products like corn, soybeans, and chemicals that China previously imported from the US can now be sourced from India.

By increasing exports of these agricultural products, India can reduce its trade deficit with China and at the same time boost its domestic agriculture.

3. Opportunities in the oil sector

Due to the US-China trade war, the US is facing challenges in exporting oil to China. Consequently, it is expected that the global oil prices will decrease. This cheaper oil could benefit India by:

• Reducing its import costs
• Improving its current account deficit
• Achieving better economic stability

Also, lower oil prices will help India save on energy costs. With cheaper energy, Indian industries can lower their production costs and increase their industrial output.

4. New agricultural export channels

It is worth mentioning that China has lifted bans on Indian products like “rapeseed meal” and “non-basmati rice”. These moves provide a chance for India to export millions of tons of these goods to China.

Moreover, with China’s increasing demand for agricultural products, India’s farming sector can gain significantly. This can boost both rural economies and national export figures.

5. Reduced competition in Key Sectors

The US-China trade war gives India a competitive edge in sectors like textiles, gems, and jewellery. In these sectors, previously, Chinese exports dominated the market. Now, due to higher tariffs, Chinese goods have become more expensive in global markets. Similarly, higher tariffs have also been imposed on Chinese medical supplies, such as:

• Face masks
• Syringes
• Gloves
• Natural graphite

This creates a significant opportunity for India. By increasing the production and export of these high-demand products, India could expand its presence in the US market.