India Wary of Import Surge as Global Trade Tensions Mount

India’s Ministry of Commerce and Industry is on high alert, bracing for a potential surge in imports of various goods as a direct consequence of escalating global trade conflicts triggered by recent tariff actions from the United States and retaliatory measures from countries like China. The “Liberation Day” tariffs imposed by the U.S. and the subsequent counter-tariffs are raising fears that nations facing restricted access to American markets may divert their exports to India’s substantial consumer base.

Authorities in New Delhi are reportedly concerned about increased inbound shipments, particularly of agricultural produce from the U.S. and manufactured items from key Asian economies such as China, Vietnam, and Indonesia.

The primary apprehension revolves around the potential for “dumping,” where countries with surplus production capacity, finding traditional export destinations less accessible due to tariffs, might offload goods onto the Indian market at reduced prices. This is especially concerning for products vital to these countries’ economies and export strategies.

Observers point to specific sectors and nations as prime examples where this dynamic could unfold. Bangladesh’s readymade garments and textile industry, a global manufacturing powerhouse with exports heavily reliant on this sector, could seek alternative markets. Similarly, Indonesia’s electronics industry, a significant contributor to its economic growth and employment, might look towards India amidst increased tariff barriers elsewhere.

China, a dominant force in global manufacturing, is also anticipated to seek new avenues for its considerable production output. A World Trade Organization (WTO) review last year highlighted China’s growth as a manufacturing hub, driven by factors including labour and infrastructure. However, member countries also raised concerns about Chinese government subsidies, particularly to state-owned enterprises, which they argued distorted global markets and contributed to overcapacity. With manufactured goods constituting the vast majority of China’s exports and the U.S. being a major destination, Beijing may now be exploring other markets.

The situation also presents a potential twist regarding U.S. agricultural exports. With China imposing retaliatory tariffs on American farm produce, particularly soybeans and corn, the U.S. may look to India as an alternative market for these commodities. Data from the U.S. Department of Agriculture indicated a decline in agricultural exports to China in 2024, partly due to increased competition from South American suppliers.

According to experts like Ajay Srivastava, founder of the think-tank Global Trade Research Initiative (GTRI), several Indian sectors face heightened risk from this potential import surge. These include chemicals, steel, aluminium, textiles, plastics, rubber, electronics, and consumer goods. Many of these sectors are already under scrutiny by the Directorate General of Trade Remedies (DGTR) for potential dumping.

The domestic steel sector, for instance, has already experienced downward price pressure attributed to dumping. Preliminary findings from an anti-dumping investigation in March cited “trade diversion due to protective measures” by the U.S. and EU as a major factor in the surge of certain steel imports. The DGTR noted that large steel-producing nations like Japan, South Korea, and China possess capacities exceeding their domestic consumption, potentially leading to excess supply being directed elsewhere. Consequently, a provisional safeguard duty of 12% was recommended for 200 days in March to curb the import spike. In the chemical industry, the DGTR recently concluded that China was dumping titanium oxide, used in cosmetics and paints, causing injury to domestic producers.

Mohit Singla, founder-chairman at the Trade Promotion Council of India (TPCI), highlighted that consumer products are particularly vulnerable to dumping. He emphasized that smaller industries, such as textiles, face significant challenges in collectively addressing import surges due to their fragmented nature. Unlike larger, more consolidated industries that can more easily organize to seek protective measures, small and medium enterprises (MSMEs) often rely on the government taking suo motu cognizance of rising imports.

Despite the valid concerns, Srivastava believes the risks from dumping are likely manageable in the broader context. He pointed out that India has a history of imposing anti-dumping duties on products from various countries, including China, Korea, and EU nations, and also faces similar actions against its own exports. As these duties typically apply to a limited portion of total imports, he suggested that while dumping may increase in specific sectors, the overall economic impact should be contained by existing trade defence mechanisms.

Experts caution that domestic firms may find it difficult to counteract dumping solely through improved quality or competitive pricing. Mithileshwar Thakur, secretary general at the Apparel Export Promotion Council (APEC), explained that the substantial margins involved in dumping make it impossible to counter through pricing adjustments. He stressed that trade remedies like safeguard duties, countervailing measures, or anti-dumping duties are the only effective tools.

The APEC has already raised concerns about potential dumping in the textile sector with the Ministry of Commerce and Industry. While anti-dumping duties aim to correct unfair trade practices where goods are exported at prices below their normal value with predatory intent, safeguard duties are intended to mitigate the impact of a sudden surge in imports. Singla noted that pursuing anti-dumping duties is typically a lengthy and complex quasi-judicial process, suggesting that safeguard duties, which can be imposed more simply based on import trend analysis over a six-month period, might be a more immediate solution for addressing import surges.

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