China Dumping to India Amid Trump Tariff Turning Worrisome

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India Must Diversify Export Basket to Gain from Supply Chains Disruptions

By Pradeep Kumar Panda

Bhubaneswar, May 1, 2025: India posted a trade deficit of $99.2 billion with China in the 2024-25 fiscal year, according to trade data, primarily due to a sharp rise in imports of electronic goods and consumer durables.

This is a few billion short of the psychologically significant $100-billion mark. This report comes amidst high drama surrounding US president Donald Trump’s announcement last week of a 90-day suspension on most tariff increases for key trade partners, including India, while significantly raising tariffs on Chinese products.

The latter has raised concerns that Chinese companies might redirect their exports to alternative markets.

Recent data released by the Ministry of Commerce, Government of India showed that exports to China fell by nearly 3% in March and declined by more than 14% over the full financial year.

Imports from China, however, saw a sharp rise – surging 25% in March to $9.6 billion and increasing over 11% year-on-year to $113.4 billion.

These figures display India’s disproportionate reliance on Chinese imports, especially in sectors such as electronics, machinery, and chemicals. China is also India’s leading supplier across all eight major industrial product categories.

Rising US costs may prompt exporters from countries like China, Vietnam and Indonesia to divert goods to India, triggering import surge.

India’s top five import sources, the commerce ministry’s data says, in terms of change in value, exhibiting growth in FY 2024-25 (April-March) vis a vis FY 2023-24 (April-March) are United Arab Emirates (32.06%), China (11.52%), Thailand (43.99%), USA (7.44%) and Russia (4.39%).

India’s merchandise trade deficit plummeted to a 20-month low of $14.05 billion in February 2025, as exports and imports saw a sharp contraction due to softening global petroleum prices and rising economic uncertainty amid restrictive trade practices by the United States.

The trade deficit — the gap between imports and exports — stood at $19.52 billion in February 2024.

Data released by the Ministry of Commerce showed outbound shipments from India contracted at the sharpest pace in 20 months, falling 10.9 per cent year-on-year to $36.91 billion in February.

However, officials said the decline in exports could also be attributed to a high base of $41.4 billion in the same period a year ago.

Imports fell 16.3 per cent to $50.96 billion — the most significant decline in 20 months and the first drop in 11 months — driven largely by a 29.6 per cent fall in oil imports to $11.9 billion. Gold imports also tumbled 62 per cent to $2.3 billion.

The outlook for India’s merchandise exports remains uncertain due to the looming threat of reciprocal tariffs the US plans to impose on trading partners starting April 2. The US has already levied a 25 per cent duty on steel and aluminium imports. Exporters also report a troubling trend of American importers holding back orders in anticipation of further tariffs.

India’s export contraction stood out among other emerging market economies. China, the world’s largest trading nation, saw exports rise 7.1 per cent in January-February 2025, while Vietnam’s outbound shipments climbed 8.4 per cent over the same period.

On a cumulative basis, India’s merchandise exports were flat at $395 billion in the first 11 months of the current financial year.

Non-petroleum and non-gems-and-jewellery exports — often viewed as a clearer gauge of export health — fell nearly 5 per cent to $28.57 billion in February. Key sectors that saw declines included gems and jewellery (-20.7 per cent), drugs and pharmaceuticals (-1.5 per cent), organic and inorganic chemicals (-24.5 per cent), petroleum products (-29.2 per cent), and engineering goods (-8.6 per cent).

However, exports of rice (13.2 per cent), electronic goods (26 per cent), and readymade garments (4 per cent) posted gains.

Increase in India’s trade deficit explained from a sharp rise in crude oil, gold, and silver imports. A portion of the year-on-year decline in merchandise exports can be attributed to the base-year effect related to the leap month.

The trade deficit was also significantly lower than the average of over $23 billion during the first 10 months of FY25. Given this print, we now expect the current account to post a surplus of about $5 billion in Q4FY25, equivalent to roughly 0.5 per cent of GDP.

While exports have faced challenges, particularly from the global tariff war, the sharp drop in imports signals weaker demand for foreign goods, which could create opportunities for domestic industries.

A concerted effort is needed to revitalise export growth, particularly through targeted initiatives that enhance India’s global competitiveness.

A focused approach is required to diversify exports, explore new markets and products, and maintain trade facilitation measures.

Services exports rose 23.6 per cent to $35.03 billion in February, while services imports climbed 8.6 per cent to $16.55 billion, resulting in a surplus of $18.5 billion.

However, the February services trade data is an “estimate” and will be revised following the Reserve Bank of India’s subsequent release.

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