India to step up vigil on Chinese imports after US tariffs

Indian agencies have begun strict vigilance for any unusual spike in imports from China and ASEAN nations, amid concerns that Beijing may divert its surplus products to India after being hit with a 34% additional duty in the US market, officials said.

“Major global economies are wary that after facing high reciprocal tariffs in the US market, certain countries may divert their surplus to flood other markets either directly or through a third country with which they have free trade agreements,” a senior official said, speaking on condition of anonymity.

“However, Indian customs and other agencies are on high alert to detect any such dumping of goods. Besides, there are plenty of legal instruments with us to protect our domestic industries from such malpractices,” the official added.

The Narendra Modi government has been pushing the 10-member Association of Southeast Asian Nations (ASEAN) bloc for an expeditious review of the India-ASEAN trade agreement to address vulnerabilities in the pact, with a revised agreement expected later this year, according to another official from an economic ministry who also requested anonymity.

The official described the 2009 agreement, signed under the previous UPA government, as “hurriedly-signed” and said the current administration is renegotiating the trade deal after finding that goods from China and other non-ASEAN nations have been routed through the ASEAN-India Trade in Goods Agreement (AITIGA), taking advantage of duty concessions under the pact.

The 10 ASEAN members are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.

Indian industry has expressed concern about a potential influx of imports through this route, as both China and most ASEAN nations now face substantial tariff barriers in the US market following President Donald Trump’s April 2 executive order. While China faces an additional 34% tariff, Vietnam faces 46%, Cambodia 49%, Indonesia 32%, Myanmar 44%, and Thailand 36%, compared to India’s 26%.

“High retaliatory tariffs would make their goods uncompetitive in the US market, and because they (particularly China) have created huge production capacities, goods produced for the American market would be pushed into other markets. As India is the fastest-growing major market in the world, it would be one of the prime targets,” the first official explained.

One of the officials cited above pointed out that the relative nature of trade advantages and disadvantages puts Indian exporters in a better position compared to competitors facing much higher duties in America, including China, key ASEAN players, Bangladesh (37% additional duty), and Sri Lanka (44%). “Exports of labour-intensive goods are also price sensitive. About 6-20% differences in exports that thrive on wafer-thin margins would be the deciding factor in any overseas market,” the official added.

Certain sectors like shrimps and carpets would need to explore new and alternative markets such as Europe, this person said, since India may struggle to compete with Ecuador and Venezuela on shrimp exports in terms of tariff advantages, while Turkey may have a tariff advantage in carpet exports.

“However, India is by and large a winner in this reciprocal tariffs action of the US,” the first official said, citing two reasons: “tariff advantage over major competitors and Prime Minister Modi’s vision to initiate a BTA (Bilateral Trade Agreement) with the US, much before April 2.”

“India has the first mover advantage as it is negotiating a BTA with America, and the Trump administration sent its negotiating team only to one country in the world, which is India,” the official added.

The government is proactively consulting all stakeholders, particularly exporters, and is determined to address the tariff issue, the official said, describing policy measures to boost exports as a "work in progress.”

The Hindustan Times reported on Saturday that the Indian government has begun talks with industry representatives to develop a comprehensive package aimed at boosting domestic manufacturing and promoting exports to counter the impact of the 26% additional tariffs announced by US President Donald Trump on April 2.