Tariffs: India battles Chinese 'dumping' as Trump's trade tensions escalate

BBC News

06-05-2025

The pace at 64-year-old Thirunavkarsu's spinning mill in southern India's Tamil Nadu state has noticeably slowed down. The viscose yarn – a popular material that goes into making woven garments – he produces, now sits in storage, as orders from local factories have dropped nearly 40% in the last month.That's because Chinese import of the material has become cheaper by 15 rupees ($0.18; £0.13) per kilo and has flooded Indian ports.With Donald Trump imposing tariffs of up to 145% on Chinese goods going into the US, manufacturers in China have begun looking for alternative markets.India's textiles makers say they are bearing the brunt of the trade tensions as Chinese producers are dumping yarn in key production hubs.While China is the leading producer of viscose yarn, India makes most of the viscose yarn the country needs locally with imports only bridging supply gaps.Mill owners like Thirunavkarsu fear their yarn won't survive the onslaught of such competition."We can't match these rates. Our raw material is not as cheap," he says.Jagadesh Chandran, of the South India Spinners Association, told the BBC nearly 50 small spinning mills in the textile hubs of Pallipalayam, Karur and Tirupur in southern India are "slowing production". Many say they'll be forced to scale down further if the issue isn't addressed.
China's Ambassador to India, Xu Feihong has sent assurances to India that his country will not dump products and in fact wants to buy more high-quality Indian products for Chinese consumers."We will not engage in market dumping or cut-throat competition, nor will we disrupt other countries' industries and economic development," he wrote in an opinion piece for the Indian Express newspaper.But anxieties about dumping are spread across sectors in India, as China - Asia's biggest economy - is the world's largest exporter of practically all industrial goods, from textiles and metals, to chemicals and rare minerals.While pharmaceuticals - and later phones, laptops, and semiconductor chips - were exempted from steep tariffs, large chunks of Chinese exports still run into Trump's 145% tariff wall. It is these goods that are expected to chase other markets like India.Their sudden inflow will prove "very disruptive" to emerging economies in Asia, according to Japanese broking house Nomura, whose research earlier revealed that China was flooding global markets with cheap goods even before Donald Trump took office earlier this year.In 2024, investigations against unfair Chinese imports rose to a record high. Data from the World Trade Organisation (WTO) shows, nearly 200 complaints were filed against China at the forum - a record - including 37 from India.India in particular, with heavy dependencies on Chinese raw materials and intermediate goods, could be hit hard. Its trade deficit with China - the difference between what it imports and exports - has already ballooned to $100bn (£75bn). And imports in March jumped 25%, driven by electronics, batteries and solar cells.In response, India's trade ministry has set up a committee to track the influx of cheap Chinese goods, with its quasi-judicial arm probing imports across sectors, including viscose yarn.India also recently imposed a 12% tax on some steel imports, locally known as a safeguard duty, to help halt an increase in cheap shipments primarily from China, which were pushing some Indian mills to scale down.Despite such protections - and a loud marketing campaign by Prime Minister Narendra Modi's government to boost manufacturing locally - India has found it hard to reduce its reliance on China, with imports rising even when border tensions between the two neighbours peaked after 2020. That's because the government has only had "limited success" with its plans to turn India into the world's factory through things like the production linked subsidies, says Biswajit Dhar, a Delhi-based trade expert. And India continues to depend heavily on China for the intermediate goods that go into manufacturing finished products.
While western multi-national companies like Apple are increasingly looking towards India to diversify their assembly lines away from China, India is still dependent on Chinese components to make these phones. As a result, imports in sectors like electronics have risen significantly, pushing up its trade deficit.India's burgeoning deficit is a "worrying story", says Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI) think tank, all the more so because its exports to China have dropped to below 2014 levels despite a weaker currency, which should ideally help exporters."This isn't just a trade imbalance. It's a structural warning. Our industrial growth, including through PLI (production linked incentive) schemes, is fuelling imports, not building domestic depth," Srivastava wrote in a social media post. In other words, the subsidies are not helping India export more. "We can't bridge this deficit without bridging our competitiveness gap."India needs to get its act together quickly to do that, given the opportunity US trade tensions with China have presented. But also because countries with a large rise in imports from China generally tend to see the sharpest slowdown in manufacturing growth, according to Nomura.Akash Prakash of Amansa Capital agrees. A key reason why Indian private companies were not investing enough, was because they feared being "swamped by China", he wrote in a column in the Business Standard newspaper. A recent study by the ratings agency Icra also corroborates this view. With fears of Chinese dumping becoming more widespread and the likes of the European Union seeking firm guarantees from Beijing that its markets will not be flooded, pressure is mounting on China - which is now urgently looking to secure newer trading partners outside the US.China wants to completely shift the narrative, says Mr Dhar, "It is trying to come clean amidst increased scrutiny".Despite the reassurances from Beijing, Delhi should use thawing relations with its larger neighbour to kickstart a proper dialogue on its firm stance about dumping, says Mr Dhar."This is an issue that India must flag, like most of the Western countries have."Follow BBC News India on Instagram, YouTube, Twitter and Facebook.