After levying an initial 10% tariffs across all the imports from China, US President Donald Trump has now levied an additional 10% tariffs on Chinese imports. In retaliation, China has also imposed tariffs ranging from 10%-15% on key USA exports which includes coal, crude oil, LNG, large vehicles as well as agricultural machinery.

“We believe that USA levying severe tariffs on Canada, Mexico and China may benefit export to USA market for Indian chemical companies as they may seek alternative to China, while overall sales in India as well as in non-USA market may see flood of cheap imports from China. Indian companies get a 10% benefit over Chinese counterparts considering 10% retaliatory tariffs by USA on Indian companies,” predicts Prabhudas Lilladher.

According to the report, USA is largest importer of chemicals of India and accounts for 14% of the total chemical’s exports from India. “Back in 2018 when first trade war between USA-China began, India was a beneficiary with its total exports to USA increased from US$ 57bn before the war period to US$ 73bn during the trade war,” the report adds.  

India exports its chemicals to almost 175+ countries with key export destinations like China, USA, Brazil, Netherlands, Saudi Arabia, Indonesia, UAE, Japan, Germany, etc.

USA was the largest importer of chemicals from India in FY23, with total exports standing at US$ 3.85 billion. USA imports dyes and its intermediates, agrochemicals as well as inorganic and organic chemicals from India. In FY24, chemicals exports of India USA reduced by 26% but still has highest share standing at 14%. “We may expect these numbers to increase going forward as 20% tariffs on China will compel USA firms to find an alternative supplier for chemicals,” the report further adds.

The report states that as tariff rates are expected to remain high, Chinese manufacturers may divert their exports to USA from other countries to avoid tariffs. Vietnam and Mexico have been hotspots for Chinese manufacturers to re reship goods to USA. However, as USA has also imposed 25% tariffs in Mexico, it is no longer an option for rerouting exports.

China may flood other markets at cheaper rates which will depress the global prices. Indian companies export to any such countries may be impacted due to stiff competition from China.

According to the report, Vinati, Navin and Aarti have highest exposure to USA. Vinati Organics exports mainly ATBS, while Navin Fluorine exports HFO and CDMO products, these products don’t have major competition from Chinese companies. Any additional tariffs on China by USA will not impact the exports for these products. Aarti industries exports mainly MMA along with a few other products to the USA.

Source: Industry, PL