US-China trade war: Will India suffer from the fallout?

The US and China are fighting. And India is watching closely.

On Monday, US president Donald Trump threatened China with an additional tariff of  50 per cent.

Trump earlier unveiled a tariff of 34 per cent on China during his ‘Liberation Day’ event at the White House.

This was over and above a 10 per cent base tariff applicable to all nations worldwide.

“It’s the only chance our country will have to reset the table. Because no other president would be willing to do what I’m doing, or to even go through it,” he told reporters at the White House.

“Now, I don’t mind going through it because I see a beautiful picture at the end.”

Beijing on Tuesday vowed to ‘fight to the end’ against Trump.

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But what happened? And what does this trade war mean for India?

Let’s take a closer look:

What happened?

Trump on Monday threatened China with an additional tariff of 50 per cent.

“If China does not withdraw its 34 per cent increase above their already long term trading abuses by tomorrow, April 8th, 2025, the United States will impose ADDITIONAL Tariffs on China of 50%, effective April 9th,” Trump wrote on his Truth Social platform.

“Additionally, all talks with China concerning their requested meetings with us will be terminated!”

The development came after Beijing vowed to retaliate to the ‘reciprocal’ 34 per cent tariff Trump announced last week.

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If Trump follows through with his threat, that would mean that China would have to pay a combined tariff of 104 per cent.

Beijing has vowed to fight Washington tooth and nail.

The Commerce Ministry said the Us’ imposition of “so-called ‘reciprocal tariffs’” on China is “completely groundless and is a typical unilateral bullying practice.”

“The countermeasures China has taken are aimed at safeguarding its sovereignty, security and development interests, and maintaining the normal international trade order. They are completely legitimate,” the ministry said.

“The US threat to escalate tariffs on China is a mistake on top of a mistake and once again exposes the blackmailing nature of the US. China will never accept this. If the US insists on its own way, China will fight to the end,” it added.

China, the world’s second-largest economy, has taken retaliatory tariffs and the ministry hinted in its latest statement that more may be coming.

Not only could that increase prices for American consumers, it could also give China an incentive to flood other countries with cheaper goods and seek deeper relationships with other trading partners, particularly the European Union.

China is one of the US’s top trading partners, especially for consumer goods, and the tariffs — essentially a tax on imports paid by US companies — will eventually be passed on to the consumer.

China’s retaliatory levies are the firmest response yet to Trump’s announcement, which has been met with bewildered condemnation from other leaders.

“If the tariffs keep going up and up, it becomes a battle of wills and principles rather than economics,” said Xu Tianchen, senior economist for China at the Economist Intelligence Unit.

What does this trade war mean for India?

Experts say India is potentially at risk from the fallout from the trade war between the US and China.

A piece in LiveMint noted that our smartphones, laptops, home appliances contain components imported from China.

“If this trade war leads to disruptions, these products could become costlier or harder to get. Indian manufacturers relying on Chinese parts will struggle, and those costs might get passed on to customers,” the piece noted.

The article stated that the raw materials used to make medicine also come from China – which could raise the cost of pharmaceuticals. The auto industry also relies on China when it comes to spare parts and critical components.

“If these parts get stuck due to supply issues, car production could slow down, prices might increase, and delivery times could get longer,” the piece stated.

Priyanka Kishore of the consultancy Asia Decoded told BBC that many major “labour intensive exports” will be impacted.

“That will likely have a knock-on impact on domestic demand and headline gross domestic product at a time when growth is already stuttering,” Kishore said.

BBC quoted Ernst & Young as saying that India’s gems, jewellery and textiles sectors could be ‘significantly’ impacted.

Millions of people work in these fields.

Nilesh Shah, a veteran fund manager, said India will also need to keep a lookout for China using its market as a “dumping ground.”

“The global South accounts for more than 20 per cent of global consumption and is where the new middle class is being created. This is where China will attempt to sell,” Akash Prakash of Amansa Capital, an investment management company based in Singapore, added.

They say Indian businesses are staring down the unknown.

“Clearly, the (Trump) administration wants even broader and deeper tariff cuts. The question is what, if anything, will satisfy the Trump administration?”, Milan Vaishnav, a senior fellow at Carnegie Endowment told the BBC.

This gains significance in the fact that White House senior counselor for trade and manufacturing Peter Navarro told on Monday told CNBC that Vietnam’s offer for 0 per cent tariffs on US imports “means nothing.”

“Let’s take Vietnam. When they come to us and say ‘we’ll go to zero tariffs,’ that means nothing to us because it’s the non-tariff cheating that matters,” Navarro said.

But others remain optimistic.

Amitendu Palit, Senior Research Fellow at the National University of Singapore, told CNBC the trade war could create opportunities for India.