India is looking to negotiate better deals with Chinese suppliers as it navigates the trade war between the US and China. In a high-level meeting last week, several line ministries were told to rally industry negotiations and work out how best to extract better deals with their Chinese suppliers, amidts the volatile Trump tariff tantrums.

The strategy focuses on leveraging India’s manufacturing capabilities to gain cost advantages from China in raw material sourcing — its reported surplus stocks — and boost exports to the US, as India is a relative beneficiary of “discounted tariffs.”

In FY24, India-China bilateral trade reached $118.4 billion, with India importing $101.7 billion in goods — primarily electronics, machinery, and chemicals — while exporting only $16.7 billion. This trade imbalance drives India’s push for discounts or price cuts, particularly in sectors impacted by US tariffs.

Ministries have been advised to adopt a cautious approach, monitoring developments, gathering stakeholder feedback, including tracking import-export data, before proposing measures such as duties or safeguards.

“So there are internal discussions to secure better trade deals from Chinese suppliers. However, there is no formal commitment as of now. The government is now in a wait-and-watch mode, and there is some keenness from industry to exploit the excess raw material stocks available in the Asian nation,” an official in the know said.

For instance, toy manufacturers in Guangdong, China, reported order cancellations for US-bound shipments. In the first phase, around 8-10% discounts were offered. But, post the Liberation Day tariff announcements, there have been more cancellations , particularly for those scheduled in June.

Negotiations On

The pitch, at present, centres on securing low-cost raw materials in sectors where US tariffs pressure Chinese suppliers. Businesses are eager to proceed with talks to capitalise on opportunities by proposing price reductions (including discounts), profit-sharing, or technology transfers to bolster domestic manufacturing.

A paint industry representative noted that ongoing discussions to secure better deals on titanium dioxide, a key raw material sourced from China, despite limited US exposure.

In steel, India is treading carefully. The Directorate General of Trade Remedies recommended a provisional 12 per cent safeguard duty on steel imports for 200 days, but its implementation may be delayed as the finance ministry reviews stakeholder appeals. Implementation could happen only after.

A government official noted that domestic steel mills, which recently increased prices, risk incurring losses from cheaper imports undercutting prices by 5-12 per cent if safeguards are not enforced.

Industry associations are actively engaging ministries to ensure affordable raw material supplies. “There’s no formal commitment yet, but the government is closely assessing options,” a senior official said.

Meanwhile, China’s export restrictions on rare earth elements, announced on April 4 in response to US tariffs, could open new avenues for India to negotiate access to minerals critical for energy, defence, and electronics.

ICICI Securities reports that investors are focusing beyond Q4FY25, with tariffs reshaping trade dynamics. Companies serving India’s domestic market are likely to outperform, while non-ferrous metal firms, tied to global prices, may face challenges. As India navigates this complex landscape, its ability to secure strategic bargains with China could redefine its role in global trade.

Published on April 13, 2025