New Delhi:

India’s manufacturing industry is bearing the brunt of a fallout between the United States and China over threats of a trade and tariff war by the incoming Trump administration, and its retaliatory measures imposed by Beijing.

In recent years, under its flagship ‘Make in India’ programme, India has seen exponential growth in key sectors like solar power, electronics and mobile manufacturing, and the automobile sector, especially for electric vehicles or EVs – all of which are directly or indirectly dependent on raw materials, components, and ancillaries supplied by China.

As China prepares for an imminent face-off with the US, which may be just days away with Donald Trump’s return as President on January 20, Beijing has already made the first move by taking some precautionary measures as a warning to Washington that it too will suffer the trade war.

China has put restrictions on the export of key raw materials, essential rare earth minerals, components, high-tech equipment, and machinery which are needed to manufacture solar panels, its parts, mobile phones and other gadgets, as well as EVs and its batteries.

These curbs not just pertain to direct exports to the United States, but to any other country which uses them to manufacture finished products meant to be shipped to the US.

In December 2024, China banned the export of gallium and germanium, which are vital for solar cell production. Shortly after that, it also banned antimony, critical for semiconductors and essential defence technologies. Earlier this month, Beijing further declared that it will now add lithium extraction and battery cathode technologies – which are crucial for EV battery manufacturing – to its controlled export list.

With the US having reduced its dependence on China for a large part of its overall imports, Washington has, in recent years, increasingly turned to New Delhi as an alternative to Beijing to fill the deficit. And so, China’s latest curbs, though aimed at the US, has indirectly hurt India too.

“Indian firms in electronics, solar, and EV sectors are facing major delays and disruptions as China has blocked exports of inputs and machinery,” economic think-tank GTRI founder Ajay Srivastava said, adding that “India is particularly vulnerable to China’s export restrictions, as many of its industries depend on Chinese machinery, intermediate goods, and components.”

“This also signals deeper geopolitical tensions and trade war. We hope India-specific restrictions go away soon as they will also hurt China,” he added.

India’s imports from China increased to $101.73 billion in 2023-24 from $98.5 billion in 2022-23.

The think-tank even suggested that China’s moves may be double-edged, as Beijing has been displeased for a while over New Delhi’s restrictions on Chinese investments and visas for its nationals.

In 2020, shortly after the deadly Galwan Valley clash between Indian and Chinese soldiers in eastern Ladakh, the Government of India had made it mandatory for countries sharing land borders with India to seek its approval for investments in any sector. The move was also made keeping in mind India’s national security objectives in its volatile neighbourhood.
 

New Delhi:

India’s manufacturing industry is bearing the brunt of a fallout between the United States and China over threats of a trade and tariff war by the incoming Trump administration, and its retaliatory measures imposed by Beijing.

In recent years, under its flagship ‘Make in India’ programme, India has seen exponential growth in key sectors like solar power, electronics and mobile manufacturing, and the automobile sector, especially for electric vehicles or EVs – all of which are directly or indirectly dependent on raw materials, components, and ancillaries supplied by China.

As China prepares for an imminent face-off with the US, which may be just days away with Donald Trump’s return as President on January 20, Beijing has already made the first move by taking some precautionary measures as a warning to Washington that it too will suffer the trade war.

China has put restrictions on the export of key raw materials, essential rare earth minerals, components, high-tech equipment, and machinery which are needed to manufacture solar panels, its parts, mobile phones and other gadgets, as well as EVs and its batteries.

These curbs not just pertain to direct exports to the United States, but to any other country which uses them to manufacture finished products meant to be shipped to the US.

In December 2024, China banned the export of gallium and germanium, which are vital for solar cell production. Shortly after that, it also banned antimony, critical for semiconductors and essential defence technologies. Earlier this month, Beijing further declared that it will now add lithium extraction and battery cathode technologies – which are crucial for EV battery manufacturing – to its controlled export list.

With the US having reduced its dependence on China for a large part of its overall imports, Washington has, in recent years, increasingly turned to New Delhi as an alternative to Beijing to fill the deficit. And so, China’s latest curbs, though aimed at the US, has indirectly hurt India too.

“Indian firms in electronics, solar, and EV sectors are facing major delays and disruptions as China has blocked exports of inputs and machinery,” economic think-tank GTRI founder Ajay Srivastava said, adding that “India is particularly vulnerable to China’s export restrictions, as many of its industries depend on Chinese machinery, intermediate goods, and components.”

“This also signals deeper geopolitical tensions and trade war. We hope India-specific restrictions go away soon as they will also hurt China,” he added.

India’s imports from China increased to $101.73 billion in 2023-24 from $98.5 billion in 2022-23.

The think-tank even suggested that China’s moves may be double-edged, as Beijing has been displeased for a while over New Delhi’s restrictions on Chinese investments and visas for its nationals.

In 2020, shortly after the deadly Galwan Valley clash between Indian and Chinese soldiers in eastern Ladakh, the Government of India had made it mandatory for countries sharing land borders with India to seek its approval for investments in any sector. The move was also made keeping in mind India’s national security objectives in its volatile neighbourhood.
 

Donald Trump’s victory in the 2024 election – and his threat to impose tariffs on all imports to the United States – highlights an important problem for the global economy.

The US is a technological powerhouse, spending more than any other country on research and development and winning more Nobel prizes in the last five years than every other country combined. Its inventions and economic successes are the envy of the globe. But the rest of the world needs to do everything in its power to avoid being too dependent on it.

And this situation would not have been much different had Harris won.

The “America first” approach of Donald Trump has actually been a bipartisan policy. At least since previous president Barack Obama’s policy of energy independence, the US has been on a mostly inward-looking quest of maintaining technological supremacy while ending the offshoring of industrial jobs.

One of the major choices Trump made in his first term was to accept higher prices for US consumers in order to protect national producers by slapping high tariffs on almost every trading partner.

For instance, Trump’s 2018 tariffs on washing machines from all over the world mean US consumers have been paying 12% more for these products.

President Joe Biden – in certainly a more polite way – then increased some of the Trump tariffs: up to 100% on electric vehicles, 50% on solar cells and 25% on batteries from China.

At a time of climate emergency, this was a clear choice to slow down the energy transition in order to protect US manufacturing.

While Biden signed a truce with Europe on tariffs, it started a perhaps even more damaging battle by launching a subsidy race.

The US Inflation Reduction Act for instance contains US$369 billion (£286 billion) of subsidies in areas such as electric vehicles or renewable energy. And the Chips Act committed US$52 billion to subsidise the production of semiconductors and computer chips.

China, Europe and the rest of the world

This US industrial policy might have been inward-looking, but it has clear consequences for the rest of the world. China, after decades of mostly export-based growth, must now deal with massive problems of industrial overcapacity.

The country is now trying to encourage more domestic consumption and to diversify its trading partners.

Europe, despite a very tight budget constraint, spends a lot of money in the subsidy race. Germany, a country facing sluggish growth and big doubts on its industrial model, is committed to matching US subsidies, offering for instance €900 million (£750 million) to Swedish battery makers Northvolt to continue producing in the country.

All those subsidies are hurting the world economy and could have easily financed urgent needs such as the electrification of the entire African continent with solar panels and batteries. Meanwhile, China has replaced the US and Europe as the largest investor in Africa, following its own interest for natural resources.

The incoming Trump mandate might be a chance to fix ideas.

One might, for instance, argue that the full-scale invasion of Ukraine, and the thousands of deaths and the energy crisis that followed, could have been avoided had the Biden administration been clearer to Russian president Vladimir Putin about the consequences of an invasion, and provided modern weapons to Kyiv before the war.

But the blame is mostly on Europe. Credit where it’s due, the strategic problem of becoming too dependent on Russian gas is something Trump had clearly warned Germany about during his first mandate.

There is a clear path forward: Europe could help China fix its overcapacity problems by negotiating an end to its own tariff war on Chinese technology such as solar panels and electric cars.

In exchange, Europe would regain some sovereignty by producing more of its own clean energy instead of importing record amounts of liquid gas from the US. It could also learn a few things from producing with Chinese companies, and China could use its immense leverage on Russia to end the invasion of Ukraine.

The European Union could also work harder on what it does best: signing trade deals, and using them as a way to reduce carbon emissions around the world.

This is not only about Europe and China. After decades of continuous improvement on all major dimensions of human life, the world is moving backwards.

The number of people facing hunger is increasing, taking us back to the levels of 2008-9. War is raging in Gaza, Sudan, Myanmar, Syria, and now Lebanon. The world had not seen as many civilian casualties since 2010.

For better or worse, it is unlikely that a Trump administration will reverse the path of lower US interventionism. It is also unlikely to lead any major initiative on peace, climate change or on the liberalisation of trade.

The world is alone, and America will not come to save it.

We do not know what will happen to the US. Maybe the return of Trump will mostly be a continuation of the last ten years. Maybe prohibitive tariffs or destroying the institutions that made the US such an economic powerhouse will make the US economy less relevant. But this is something Americans have chosen, and something the rest of the world simply has to live with.

In the meantime, the only thing the world can do is learn how to better work together, without becoming too dependent on each other.

(Author: Renaud Foucart, Senior Lecturer in Economics, Lancaster University Management School, Lancaster University)

(Disclosure Statement: Renaud Foucart does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment)

This article is republished from The Conversation under a Creative Commons license. Read the original article.
 

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)