US - China Trade War

IMPACT OF US-CHINA TRADE
WAR ON INDIA
Ten year trade analysis
How the trade war has escalated
US Imports from China hit by tariffs
Car parts
Power Converters
Wooden Furniture
Computer parts
Metal Furniture In Billion Dollars
Processing Units
Computer Circuit Boards
Telecommunication Equipment
0 5 10 15 20 25
Impact on the Indian export sector from a
macro perspective
• The Indian export sector has grown considerably over the years.
• India stands to gain a lot from the US China Trade War.
• Effects of the trade war are tariff based.
Impacts
Impact on global economy
• Involved economies (US and China)
Decline in bilateral trade
United States- Sales tax and increased costs for consumers to bear
China- Slowest growth rate in nearly 30 years
- Investment/ Growth in real estate, shoe industry, automotive, fixed assets
has dropped
- Decline in factory growth rate and loss of jobs due to low consumer
demand
- However, China has managed to keep up with its exports by
decreasing its prices and striking a balance to not let the losses affect them
• Other economies (Rest of the world)
Rise/Decline in imports and exports (Trade Diversion Effects)
- Gaining economies: Vietnam, Mexico, Canada, EU (mainly Germany),
India, Korea
- Losses are mainly only for involved economies
- Losses in supply chain activities for China
E.g. Enphase (based in California) shifting some operations to Mexico
Apple shifting from its Taiwanese supplier, Foxconn, to facilities in India
Stock Market Instability
-U.S. stocks fell after economic data showed a sharp decline in Chinese
exports to the U.S
Index Rise/Fall
Dow Jones 767 pts. fall
S&P 500 index 2.98% fall
- Technology stocks amongst the3.47%

Nasdaq hardest
falls hit
Impact on India
• Stands 6th worldwide in benefitting from the trade war
• Poses opportunity for India to become a major exporter to the US after
its tariff imposition on Chinese products
• India gained $755mn in
additional exports to the US
Product Amt.
Chemicals $243mn
Metals and Ores $181mn
Electrical Machinery & Various $83mn & $68mn respectively
Machinery
Impact on chemical industry of India
• Contributes 3% to the global chemical industry
• Expected to reach $304bn
by 2025
• Market leaders like EU
stand as a tough
competition
Opportunities
• Low labour cost
• Increase in employment rate
• 100% FDI under the automatic route allowed in chemicals
• Less stringent environmental regulation
• Diversification of supply risk
Challenges
• Low FDI investments despite favourable government policies
• Lack of product development
• Investment in R&D and infrastructural growth
Impact of US-China trade
war on India
Electronics sector
Electronics industry overview
• FY’2015:
65-70% of demand met by imports
• Period of Exponential Growth

Factors leading to growth
• 2nd Largest producer in the world
• Minimal value addition

Potential Impact of the trade war
• Price hike
• Relocation
US Based Companies
China Based Companies
Trade Deficit
• Ideal Scenario
Actual Impact of the trade war
• Study by Nomura
• Of the 56 relocated firms, only 3 chose India

Half labour costs
Median age of 31
Below potential: FDI
Lack of infrastructure
Lack of manufacturing culture
• Exceptions: Apple and Samsung

Policy actions taken by India with respect to Electronics Sector
• China dominates the US electronics import sector, accounting for 61.6 percent of electronics
imports into the United States in 2017.
• Electronics is the most imported product from China to USA.
• Now, with the imposition of tariffs by USA, they are looking for other electronics manufacturers.
South East Asian countries including India can work as a cheap alternative.
Situation of India
Disabilities of India
• Lack of adequate infrastructure
• Lack of domestic supply chain and logistics
• high cost of finance,
• inadequate availability of power
• inadequate components manufacturing base
• limited design capabilities and focus on research and development and inadequacies in skill
development
Union budget
• Ministry of Electronics and Information Technology(MEiTy) had been

allocated $951.8 Mn.
• National Electronic Policy (NEP) 2019 by the MEITY aimed to make

India a global hub for Electronic System Design and Manufacturing
(ESDM) and make the sector more competitive.
NEP 2019
• Fiscal incentives
• 20% subsidy is provided to industries inside the Special Economic Zones
• NEP 2012 introduced M-SIPS Scheme aimed at offering incentives to companies for setting up
manufacturing units. NEP 2019 has moved a step ahead of M-SIPS towards schemes which are
easier to implement.
• Phased Manufacturing Program (PMP)
• Electronics Manufacturing Clusters (EMC) 2.0 has replaced the first EMC scheme which came out
in 2012.
• Promote electronic components manufacturing ecosystem
• Sovereign Patent Fund
• Export promotion
Other factors
•India only produces raw material and intermediary products
•India fears Beijing could dump exports of electronic items

EVALUATION OF POLICY ACTIONS TAKEN BY INDIA
EXPORT SECTOR
THE IMMEDIATE PLAN
• Instant planned increase of exports to both nations
• Opportunity to reduce trade deficit
• Leverage Asia Pacific Trade Agreement
• Identification Of products in the newly available market
• Government-MoC- formulating and implementing strategies
• Talks to become a member of RCEP
Consultation policies
• Increase focus on Trade policy division
• Setting up of an excessive consultation process
DETAILED TARIFF ANALYSIS

➤ Undertaken intricate tariff analysis
➤ Explore financial & economical expansion opportunities
➤ Aim to justify trade deficit
INTER MINISTRY INTERNATIONAL BUSINESS
PROMOTION POLICY
• Facilitate visit of Ministry Heads and exporters to USA & China
• Widen market access and increase strength of trade
• Initiative - export of Non-Basmati rice
EXPORT PROMOTION MEASURES & POLICIES
➤ Taking part in events & exhibitions in China & USA
➤ Organising events to Host China & USA
➤ 18th China Products (Mumbai India) Exhibition 2020
Pharmaceuticals export promotion council
(pharmexcil)
• Reduced duty on a total of 28 products by China
• Spreading information and awareness about upcoming Chinese market
• Create awareness about the regulatory environment in China
• Memorandum Of Understanding between PHARMEXCIL and CCCMHPIE
PRIME MINISTER’S INITIATIVE

➤ PMO travelled to China - First Informal Summit - Wuhan
➤ Visited China to be a member of SCO Summit
➤ Howdy Modi - Namaste Trump
Visible Results
• Rise in exports to US by almost 9.5%-9.8% to $52.4 billion
• India has replaced Chinese exports of as many as 203 goods to USA
like rubber, carpets, etc
• Exports to China grew by 25.6% to around $17 billion
• India has replaced US exports of as many as 151 goods to China like
Diesel, X-ray tubes, etc
warning signs for the government
• India should curb imports of electronics from China - major part of
trade deficit
• Look out for Chinese Government’s extent of involvement through its
provinces
• Maintain relations with China as well as USA
• Adhere to foreign policy of non-alignment

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IMPACT OF US-CHINA TRADE

Metal Furniture In Billion Dollars

Computer Circuit Boards

- Technology stocks amongst the3.47%

• Period of Exponential Growth

• 2nd Largest producer in the world

• Minimal value addition

• Of the 56 relocated firms, only 3 chose India

• Exceptions: Apple and Samsung

• Electronics is the most imported product from China to USA.

• Lack of adequate infrastructure

• Lack of domestic supply chain and logistics

• high cost of finance,

• inadequate availability of power

• inadequate components manufacturing base

• Ministry of Electronics and Information Technology(MEiTy) had been

• National Electronic Policy (NEP) 2019 by the MEITY aimed to make

• Sovereign Patent Fund

•India fears Beijing could dump exports of electronic items

DETAILED TARIFF ANALYSIS

PRIME MINISTER’S INITIATIVE

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