US Tariffs May Trigger China's Trade Surge in Asia, Challenges for India Loom

Crisil's report warns that US President Trump's trade policies could prompt China to boost exports to Asian markets, heightening competition for Indian exporters. India's export instability continues amid geopolitical tensions, while core sectors show some resilience. Services surplus offers relief, yet the trade deficit remains a challenge.

The potential trade restrictions announced by incoming US President Donald Trump are raising concerns of intensified Chinese export activities across Asian markets, including India, as reported by Crisil. These developments are poised to intensify competition for Indian exporters while influencing the dynamics of regional and global trade.

Crisil's report indicates that expected economic slowdown in China, coupled with proposed US tariff hikes, could lead to a surge in Chinese exports within Asia. These geopolitical uncertainties, particularly US-China trade tensions, pose significant risks for the global trade environment. Meanwhile, India's trade deficit has widened this fiscal year, as imports have consistently surpassed exports.

India's export performance has been erratic throughout the current fiscal year, following an initial rise in the first quarter, exports contracted in the second quarter. Despite a brief recovery in October 2024, exports declined again in November and December, with a notable 1% year-on-year decrease in December to USD 38.01 billion, fueled by substantial drops in gems and jewellery (-26.5%) and oil exports (-28.6%).

Nevertheless, a core export growth of 8.3% partially mitigated the decline, albeit lower than the 11.8% growth recorded in November. Strong performances in core sectors such as readymade garments, ores and minerals, handicrafts, and coffee contributed positively. India's surplus in services trade and robust remittance inflows provide some cushioning for the current account, although the escalating merchandise trade deficit remains a concern requiring vigilant oversight.

The Crisil report underlines that future trade trends will depend significantly on China's redirecting strategies and India's adaptability to ensuing challenges. (ANI)

(With inputs from agencies.)