India’s benefit from US-China trade war limited, Oxford study shows

India’s attempts at boosting its manufacturing sector by capitalizing on the US-China trade war have fallen short, with other Asian rivals benefiting to a much greater extent from escalating tensions between the world’s biggest economies, a study showed.

Between 2017 and last year, India’s total share in US imports rose by 0.6 percentage points to 2.7 percent while China’s portion dropped by about 8 percentage points to under 14 percent, Oxford Economics said.

The biggest beneficiary from the trade diversion in the region has been Vietnam, whose total share in US imports grew by 1.7 percentage points to 3.7 percent in the period.

Taiwan and South Korea have also made greater strides than India, increasing their share of US imports by 1 percentage point and 0.7 percentage points, respectively, according to Oxford.

The study underscores the uphill task facing Indian Prime Minister Narendra Modi as he attempts to boost the country’s lagging manufacturing sector, whose share of GDP has remained broadly stagnant at 17 percent for over a decade.

The research also implies that India might struggle to make significant gains if former US president Donald Trump returns as US president and follows through with a threat to impose a 60 percent tariff on Chinese goods.

“The US-China trade war so far has improved India’s export prospects only to a limited extent, dashing hopes that an escalation of the conflict could boost the lagging manufacturing sector,” Oxford Economics economist Alexandra Hermann wrote in a note. “India’s export strengths largely lie in sectors of the ‘old economy,’ where growth potential is limited and competition is fierce.”

India has made substantial advances in boosting electronic exports to the US, but its imports of components from China have surged as well, suggesting there is little value added to domestic manufacturing.

China accounted for about one-third of India’s imports of electronics, machinery, and chemicals and pharmaceuticals last year. For components such as certain semiconductor devices, as much as 67 percent of India’s imports came from China, Oxford said.

Source: Taipei Times