India fails to gain from USA-China trade war

by Yash Shah

United States of America (USA) and China are trade giants on a global scale. On the basis of trade statistics released by International Trade Centre (ITC), USA and China together account for around one-fifth of world exports. In July 2018, USA & China went on a trade war by imposing higher tariffs on goods traded between them.

When tariff is levied by one country on commodities imported from another country, then countries out of such tariff war have a chance to benefit from the same. To be able to grab the market lost by China, India needed to cash in on those commodities which USA majorly imported from China. But the commodity composition of goods traded between USA & China and USA & India are not alike. Moreover, India is a small trade partner to USA compared to Germany, Japan, Mexico, Canada and China. Hence, the trade war did not benefit India’s trade with USA.

In 2017, USA’s total imports from the world stood at USD 2,406.4 billion. USA’s imports from India were USD 50.5 billion i.e. 2.1 per cent of total imports by USA. USA’s imports from China accounted for USD 525.8 billion i.e. 21.9 per cent of total imports by USA. China, Mexico, Canada, Japan and Germany made up 58.5 per cent of USA’s imports in 2017. In comparison to these giants, India is a very small trading partner for USA.

Before the trade war which began in 2018, top 10 commodities which USA imported from China included: telephone sets (including mobile phones), automatic data processing units (including computers), parts and accessories of calculating machines, toys with wheels (tricycles, toy scooters), furniture, monitors (including television sets), seats, parts and accessories of motor vehicles, lamps and light fittings and leather bags. These 10 commodities accounted for 40.3 per cent of USA’s imports from China in 2017. They also accounted for 16.6 per cent of USA’s total imports in 2017. India’s share in USA’s imports of these 10 commodities was dismal at 0.6 per cent in 2017.

Tariff war between USA & China commenced in July 2018. In July 2018, USA imposed its first round of tariffs to the extent of 25 per cent on 818 products imported from China. USA imposed at least three rounds of tariffs ranging from 10-25 per cent on various Chinese products since July 2018. These haven’t been lifted till date. In response, China has not only filed various complaints with World Trade Organisation (WTO) but has also imposed tariffs on items imported from USA. As per reports, USA has imposed higher tariffs which have impacted over two-thirds of Chinese imports since July 2018.

To ascertain the impact of the trade war, we compare China’s share in USA’s imports for five quarters before the tariff war began in July 2018 i.e. five quarters ending in June 2018, with China’s share in USA’s imports for five quarters after the tariff war began i.e. five quarters ending in September 2019. China’s share in USA’s imports fell for 8 out of 10 commodities for average of five quarters ending September 2019, compared to quarterly average share for five quarters ending June 2018.

In the case of telephone sets (including mobile phones) China alone accounted for an average of 63.3 per cent of USA’s imports during five quarters ending in June 2018. It fell by 2.3 per cent on an average during five quarters after the trade war began. Vietnam’s share rose from 5.2 per cent to 11.4 per cent for the corresponding period before and after the trade war began. China and Vietnam alone account for approximately 70 per cent of USA’s imports of telephone sets (including mobile phones). Thus, in the case of telephone sets (including mobile phones) market lost by China seems to have been taken over by Vietnam.

For automatic data processing units (including computers), China’s share in USA’s imports averaged around 58 per cent during five quarters before the trade war. After the trade war, this number fell to around 53 per cent. Part of loss in China’s share has been taken over by Mexico in the case of automatic data processing units. Likewise, for the remaining commodities from the top commodities exported by China to USA, share of USA’s imports from South Korea, Vietnam, Canada, Cambodia and Italy, have increased whereas China’s share has reduced.

India’s share in USA’s imports of these 10 commodities was 0.6 per cent for five quarters ended in June 2018 which marginally rose to 0.7 per cent for five quarters ended in September 2019. India could not seize the market lost by China during the trade war.

India is not only a small trade partner but also the items it exports to USA differ from the items China exports to USA. Top 10 items that USA imports from India are: diamonds (jewellery), medicaments, petroleum oils, crustaceans, bed linens, precious metals (jewellery), parts and accessories of motor vehicles, motor cars, vegetable saps & extracts and transmission shafts. India accounted for only six per cent of USA’s overall imports for these ten items.

India could not immediately establish a strong foothold in products in which China dominates trade with USA and hence India could not benefit from the trade war between USA & China.

CMIE STATISTICS
Unemployment Rate
Per cent
11.9 +0.3
Consumer Sentiments Index
Base September-December 2015
81.3 -1.8
Consumer Expectations Index
Base September-December 2015
82.3 -1.7
Current Economic Conditions Index
Base September-December 2015
83.7 -1.6
Quarterly CapEx Aggregates
(Rs.trillion) Jun 19 Sep 19 Dec 19 Mar 20
New projects 1.10 2.06 4.97 2.94
Completed projects 0.88 0.83 1.64 0.77
Stalled projects 0.13 0.41 0.60 0.49
Revived projects 0.29 0.52 0.83 0.41
Implementation stalled projects 0.98 0.85 0.15 1.24
Updated on: 10 Apr 2020 9:28AM
Quarterly Financials of Listed Companies
(% change) Mar 19 Jun 19 Sep 19 Dec 19
All listed Companies
 Income 8.5 4.7 -2.2 -1.7
 Expenses 5.4 2.7 -3.1 -2.2
 Net profit 213.1 17.4 -2.3 -10.3
 PAT margin (%) 3.6 6.2 5.3 5.2
 Count of Cos. 4,437 4,452 4,411 4,356
Non-financial Companies
 Income 8.0 2.4 -6.4 -5.4
 Expenses 7.7 1.7 -6.7 -6.3
 Net profit 1.6 -8.5 -14.9 -13.1
 PAT margin (%) 6.2 6.3 5.8 5.8
 Net fixed assets 5.6 10.4
 Current assets 13.2 4.6
 Current liabilities 7.3 4.8
 Borrowings 12.3 8.4
 Reserves & surplus 7.2 5.9
 Count of Cos. 3,322 3,339 3,314 3,267
Numbers are net of P&E
Updated on: 10 Apr 2020 9:28AM
Annual Financials of All Companies
(% change) FY17 FY18 FY19
All Companies
 Income 6.1 8.1 14.9
 Expenses 6.1 9.5 15.3
 Net profit 26.4 -40.2 20.5
 PAT margin (%) 3.3 2.1 3.2
 Assets 8.6 10.9 9.7
 Net worth 9.6 7.6 8.7
 RONW (%) 5.8 3.5 5.3
 Count of Cos. 27,650 25,093 15,291
Non-financial Companies
 Income 5.8 8.2 15.7
 Expenses 6.0 8.4 16.1
 Net profit 23.2 -9.1 19.5
 PAT margin (%) 2.9 2.8 4.1
 Net fixed assets 9.2 6.9 5.1
 Net worth 8.9 6.1 7.7
 RONW (%) 6.2 5.7 8.2
 Debt / Equity (times) 1.1 1.0 0.8
 Interest cover (times) 2.0 2.2 2.8
 Net working capital cycle (days) 84 76 55
 Count of Cos. 22,609 20,449 11,909
Numbers are net of P&E
Updated on: 05 Apr 2020 5:13PM