COMMENTARY – India to look for new trade strategy as US-China tariff war continues

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By Shekhar Ghosh

The escalation of Sino-US tariff war is likely to hurt India, forcing it to look for alternative markets as the trade growth globally may get adversely affected.

Despite the apparent perception of improving relations with the United States, India is now worried as the US has slapped 25 per cent tariff on steel and 10 per cent on aluminium imports. The Trump administration exempted EU, Australia, Argentina, Brazil, Canada, Mexico and South Korea, but India is not in that list.

This has led India to consider moving to WTO dispute resolution committee to challenge the US duty hike. The issue becomes important as the US is also threatening to drag India to WTO for a number of export promotion schemes on grounds that India is subsidising exports of a number of goods.

China has already moved the WTO forum against US duties on steel and aluminium. A powerful US, however, has weakened the WTO on many issues. It has also made the United nations look ineffective. The US moves are likely to hit handicraft, handloom and garment and some farm goods exports.

The situation is slowly becoming critical. Indian exports may get hit and much to the chagrin of the US, India in many ways may get closer to China, which has agreed for an informal meeting between President Xi Jinping and Indian Prime Minister Narendra Modi this week.

As US president Donald Trump imposes heavy tariffs on Chinese goods, India looks to the opportunity of trebling its cotton exports to China in the wake of 25 percent import tax on 106 commodities, including cotton, from the US.

This might lead India to change strategies despite its own battle against Chinese goods. Indian cotton traders are keen on increasing the sale from 800,000 bales to about 2 million bales, each of 170 kg to China in the season beginning October. If this happens, Indian cotton farmers will get better price. China so far is dependent on the US cotton and also imports it from Brazil and Australia.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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