Vantage | Why China can't risk a trade war with India

In the ever-evolving landscape of international relations, the question of whether trade can prevent war has taken centre stage. While the assumption historically held that countries engaging in robust trade relationships would refrain from attacking each other, the dynamics have shifted in the contemporary world.

Changing dynamics In the past, the prevailing belief was that economic interdependence fostered peace. However, in today’s scenario, trade wars have become a viable alternative to traditional armed conflicts. Rather than engaging in open hostilities, nations resort to economic strategies that can inflict severe damage on each other’s economies. India-China trade tensions The recent investigations launched by India into multiple Chinese exports, including tempered glass, glass mirrors, vacuum flasks and drawer slides, reveal a growing concern about alleged dumping practices by China. Dumping, the act of selling products in foreign markets at lower prices than in the domestic market, is viewed as a means to flood and dominate foreign markets. India has responded to these concerns with targeted measures, such as imposing anti-dumping duties on specific Chinese products, including industrial lasers. While India has initiated investigations into 32 types of products, China has retaliated with only two investigations into Indian exports, indicating a measured response. China’s calculated approach China’s restrained reaction to the investigations may stem from a recognition of the potential risks of escalating tensions. The economic imbalance in the India-China trade relationship, where India holds a significant deficit, further complicates the prospect of a full-blown trade war. The economic stakes for China in maintaining the status quo are high. China benefits substantially from the trade relationship, with India’s deficit amounting to around $51 billion. The exception to this deficit pattern is the United States, where the trade balance favours India. Despite the geopolitical tensions, Indian consumers have shown a preference for Chinese goods due to their competitive pricing. A recent survey indicates that 55 per cent of Indians purchased Chinese products in 2023, highlighting the challenge of addressing consumer preferences in any trade dispute. India’s targeted approach Recognising the delicate balance, India has adopted a three-pronged strategy to address the trade issues. This includes implementing a digital wall by banning over 200 Chinese apps, restricting Chinese investments and scrutinising Chinese operations to ensure compliance. While these targeted measures offer short-term solutions, the long-term strategy involves reducing dependency on Chinese imports. India is part of the Indo-Pacific Economic Framework for Prosperity, aligning with the global trend of de-risking and diversifying supply chains outside China. However, building alternative supply chains and reducing dependency will be a gradual process that requires patience. As India and China navigate the complex terrain of trade tensions and geopolitical conflicts, the road to economic recalibration appears challenging. The global trend towards de-risking from China underscores the need for nations to foster self-reliance and build resilient supply chains. Whether this shift can avert the looming possibility of a prolonged economic recalibration remains to be seen, as both nations weigh their options in the quest for economic balance. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views. Read all the Latest News , Trending News , Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.