News / India eyes tariff bypass via push for stronger trade ties with China

© Florin Seitan

It may take a few months, but increased trade and investment ties between India and China could checkmate the unprecedented tariff threats from the US.

Officials from both sides have already begun talks on revamping bilateral relations pushed back by recent border disputes and diplomatic tension.  A scheduled visit by Indian prime minister Narendra Modi to Beijing this week is expected to accelerate the push.

Two-way trade flow has historically favoured China, with India heavily relying on industrial finished/semi-finished inputs as well as consumer goods from the production powerhouse.

But recent provisional data has provided some signs of a rebalancing of the trade pattern.  Indian exports to China by value were up 20% year on year in the April-to-July period, somewhat narrowing the large gap.  That export boost came mostly from trades across the agriculture, electronics and energy sectors, available data indicates.

Amid the momentum, local industry sources believe anticipated stronger trade between India and China will see a fresh influx of container capacity by ocean carriers, including some mainline operators.

Cosco is the most dominant among Asian carriers targeting India-China trades, with niche intra-Asia operators including Wan Hai, Pacific International (PIL), Regional Container Lines (RCL), CULines and TS Lines.

“The recent US tariffs have nudged India and China closer, creating a new momentum in trade and supply chains,” Raju Antony, COO at Mumbai-based logistics group Abrao Group, told The Loadstar.

“This shift is set to drive stronger demand for logistics providers as companies reconfigure supply chains to serve regional markets.”

And Pushpank Kaushik, CEO of Jassper Shipping India, believes closer ties between India and China would mean greater significance for supply chains linked to rare earth magnets, fertilisers, and other essentials.

“This could be a timely move, especially as Indian industries push for faster access to critical imports,” he said. “Stronger access to Chinese markets, smoother trade and supply chain cooperation could help India reduce its reliance on the US.”

Some early positive signs are already emerging. Beijing is believed to have relaxed export curbs to release more urea shipments to India, some 7m tonnes, critical to its agrarian economy.

According to industry data, Indian containerised exports to the Far East are now in the region of 125,000 teu a month, but inbound volumes far outpace this, given the trade pattern.

Ocean rates from China to India have noticeably strengthened in recent months, but a more balanced trade flow will have the potential to make carrier balance sheets on the routes stronger, sources believe.

Meanwhile, India is set to find itself subject to US tariffs of 50% from tomorrow, of which 25% is a punitive duty for its continued trade with Russia.