Trump’s tariff hikes on Chinese goods may impact Indian exporters

The incoming US President Donald Trump’s plan to impose steep tariffs on Chinese goods could push China to adopt aggressive export strategies, targeting Asian markets like India. A Crisil report suggests this shift may heighten competition for Indian exporters in regional and global markets, potentially dampening India’s export growth. The report notes that the expected slowdown in China’s economy, coupled with the tariffs, might force China to redirect its goods to neighboring markets.

Image Credit: Shutterstock

The incoming US President Donald Trump’s proposed steep tariff hikes on Chinese goods could lead to aggressive export strategies by China targeting other Asian markets, including India. According to a report by Crisil, this shift is likely to intensify competition for Indian exporters in regional and global markets, potentially slowing India’s export growth.

The report highlights that the anticipated slowdown in China’s economy, combined with the proposed tariffs, may compel China to offload its goods in nearby markets. This could create significant pricing pressures, particularly for Indian exporters who already face stiff competition in sectors such as textiles, electronics, and machinery.

Adding to the complexity, geopolitical uncertainties such as US-China trade tensions continue to pose risks to global trade flows. These factors, coupled with India’s widening trade deficit, present a challenging scenario for the country’s export sector. During the current fiscal year, India’s export performance has been volatile. While merchandise exports grew steadily in the first quarter, they contracted in the second quarter. A brief recovery in October 2024 was overshadowed by declines in November and December, with December’s merchandise exports dropping 1% year-on-year to $38.01 billion, following a 4.8% fall in November.

The declines were driven by steep reductions in gems and jewelry exports (-26.5%) and oil exports (-28.6%). However, core export growth, which includes sectors like readymade garments, handicrafts, ores, minerals, and coffee, provided a cushion with 8.3% growth. Yet, this figure was still below the 11.8% growth recorded in November.

Amid these challenges, India finds some relief in its surplus in services trade and strong remittance inflows, which are expected to help maintain the current account balance. Nevertheless, the rising merchandise trade deficit remains a concern that requires close monitoring.

Looking ahead, the Crisil report emphasizes that the trajectory of trade dynamics will depend on China’s strategies to redirect its exports and India’s ability to adapt. For Indian exporters, focusing on improving product quality, diversifying markets, and leveraging trade agreements could be key to weathering this storm.

As the global trade environment grows increasingly uncertain, proactive measures will be essential for India to mitigate risks and maintain its competitiveness on the international stage.