India watchful of US-China trade war

New Delhi: India is watchful of the fast changing trade scenario even as experts cautioned that New Delhi must prioritise its own interests and avoid being dragged into the US-China trade war after Beijing on Friday slapped 34% additional tariff on imports from the US in a tit-for-tat response to Washington's reciprocal tariffs.

While the government is wary of dumping of Chinese products because of the US' tariffs, it is also watching the situation unfolding with the escalation of the trade war. "We are watching the situation," said an official on China's move to slap additional tariffs on the US.

The government is already looking into the issue of dumping of Chinese goods from third countries, particularly from those with which India doesn't have any trade pacts.

The US gives preferential benefits on 50% value addition but India's criteria is minimum operation, including repackaging. This means Chinese goods imported into India can be exported after repackaging. Beijing also announced export controls on certain rare earth metals, aiming to hit American defence, computer and smartphone industries. The tariffs on all products imported from the US will be imposed from April 10. China also announced plans to file a dispute with the World Trade Organization challenging the US' tariffs.

India is not a major importer of American corn and soybeans but experts cautioned that any move by India to lower tariffs or allow corn imports for its conversion into ethanol for ethanol blending might help the US but risks being perceived by China as taking sides.

This assumes significance as the National Trade Estimates report released by the USTR last month said India prohibits the importation of ethanol for fuel use. An import licence from the government is needed to import ethanol for non-fuel purposes.

"Doing this could trigger backlash from China, including a possible halt in critical exports like electronics and machinery, as seen in recent months," said Ajay Srivastava, founder, GTRI.