Trump Tariffs On China To Have Spillover Impact On India: Analysts

The imposition of tariffs by US President Donald Trump on China will have a spillover impact on India, but dumping concerns from the neighbouring country might be negligible, according to analysts.

While China is at the centre of Trump's America First Trade Policy, but the rest of Asia is also at risk as his tariffs are centred around trade imbalances, reciprocal and sectoral tariffs, according to Nomura.

Since the reciprocal tariffs are based on tariff gap, value-added tax and non-tariff barriers, emerging Asian economies, especially India and Thailand, have higher relative tariff rates (on US exports), especially in agriculture and transportation, it said.

"Broadening the criteria to include non-tariff barriers increases the likelihood of the imposition of a reciprocal tax across a broader swath of emerging and developed Asian economies," Nomura said.

Nomura described the visits of Prime Minister Narendra Modi and Commerce Minister Piyush Goyal as a plan to stump the impact of reciprocal tariffs.

"Many Asian policymakers are stepping up on their plans to invest more in and import more from the US, lower tariffs on US imports, strengthen alliances outside the US, mitigate third-country risks and position themselves to benefit from the next round of supply-chain shifts," the brokerage said.

When Trump first announced reciprocal tariffs, there were dumping concerns, especially in steel, with India's domestic market being hurt by China and other countries. Dumping of steel has been a longstanding issue and India's steel ministry has intensified monitoring of imports while also studying the situation to potentially impose countervailing and anti-dumping duties.

"A 10% tariff on China is too less, it will absorb the impact and there shouldn't be any dumping concerns," according to Ajay Srivastava of Global Trade Research Initiative.

India Ratings and Research, and Citi put the impact of potential reciprocal tariffs on India by the US at about $7 billion in the next financial year.

“However, the weighted average tariff differential is around 7%, and a more plausible scenario as per Ind-Ra is a decline in exports to the US by $2 billion–3.5 billion, leading to a decline in the GDP growth in the range of 5–10 bps from our current estimate of 6.6%," says Devendra Pant, chief economist at Ind-Ra.

While clarity will likely emerge in the next four to six weeks, following the discussions between the two governments, emerging geoeconomics will remain a key monitorable for the Indian economy.