Indian exporters are expressing concerns over a potential influx of Chinese products following the recent escalation in the US-China tariff war. The United States has significantly increased tariffs on a range of Chinese imports, including electric vehicle (EV) batteries, computer chips, and medical products, prompting fears that China might retaliate by redirecting its excess production to India.
Ashwani Kumar, President of the Federation of Indian Export Organisations (FIEO), highlighted the risk of Chinese overcapacity leading to dumping in India. “China is sitting on overcapacity in many sectors and thus the threat of dumping, in any case, is not ruled out, especially when a major market is closed for their exports. I am sure industry and the government will be keeping a close watch on imports,” Kumar stated during a press briefing.
China’s Dominance in Battery Production
China’s substantial role in the global EV market, driven largely by its dominance in battery production, underscores the potential impact of the US tariffs. In 2023, China’s production of lithium-ion batteries matched global demand, totaling 2,600 GWh. The Chinese battery giant, Contemporary Amperex Technology Co Limited (CATL), accounts for two-thirds of global battery production, supplying major automakers like Tesla, Volkswagen AG, and Toyota Motor Corp.
Opportunities Amidst the Tariff War
Despite the challenges, the US-China tariff war may open opportunities for Indian exporters. Kumar noted that India could potentially fill the supply gap created by the tariffs. “This [tariff war] provides an opportunity for India and other competitors to chip in the supply gap. Of the products affected by additional duties on China, India has opportunities in facemasks, Personal Protective Equipment Kit (PPE), syringes & needles, medical gloves, aluminium, and iron & steel. Opportunity may come in China also with retaliation on US exports, provided we have market access in products targeted by China,” he explained.
European Union’s Stance and Further Implications
The European Union is also poised to implement similar trade barriers against China, which could further exacerbate the dumping threat. The European Commission (EC) launched an anti-subsidy investigation into Chinese battery electric vehicles (BEV) last October. The investigation aims to determine whether Chinese BEV value chains benefit from illegal subsidies and if such practices harm the EU’s EV manufacturers.
Specifics of the US Tariff Increases
The US has announced substantial tariff hikes across various Chinese goods. Tariffs on EVs will rise from 25% to 100%, with total duties reaching 102.5%. Lithium-ion EV batteries and parts will see tariffs increase from 7.5% to 25%, while tariffs on photovoltaic cells used in solar panels will go from 25% to 50%. Some critical minerals will now face a 25% tariff, up from zero.
Further tariff increases are scheduled for 2025 and 2026, covering semiconductors, non-EV lithium-ion batteries, graphite, permanent magnets, and rubber medical and surgical gloves. The US justified these measures by citing “unacceptable risks” to its economic security due to what it sees as unfair Chinese trade practices flooding global markets with cheap goods.
As the tariff war unfolds, Indian exporters and the government must stay vigilant to mitigate the risk of Chinese dumping and capitalize on emerging opportunities in the global market.
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