The United States is intensifying its crackdown on transshipment, a practice that could significantly impact India’s trade relations and its reliance on Chinese imports.
US Targets Transshipment Routes
The US government is tightening its trade policies, particularly on goods that are “transshipped.” This refers to products imported into one country and then re-exported to another, often with minimal changes.
Washington views this as a loophole, allowing goods from countries like China to bypass direct tariffs and enter the American market through third-party nations.
India Under Washington’s Scrutiny
This crackdown has direct implications for India. US Vice President JD Vance recently issued a clear warning during his visit, emphasizing that America seeks partners who actively build, not just act as conduits for goods from other places.
This message is critical for New Delhi, especially given India’s increasing reliance on Chinese products, a trend that has accelerated significantly since the COVID-19 pandemic.
India’s Balancing Act: Rising Imports and Exports
Official trade data highlights India’s delicate position. India’s exports to the US and its imports from China have both seen substantial growth simultaneously. For instance, in April, India’s exports to the US surged by 27.31% to $8.41 billion, while imports from China also jumped 27.03% to $9.90 billion.
A similar pattern was observed in March, and for the full fiscal year 2025, India’s exports to the US increased by 11.59% to $86.51 billion, with imports from China rising 11.52% to over $113 billion.
While June saw a notable 23.53% increase in exports to the US against a modest 2.48% rise in Chinese imports, India has also started imposing more anti-dumping duties on high-value items from China, like steel.
The Challenge of Reducing Chinese Dependency
Decoupling from China is proving difficult for many nations, including the US itself. For India, with its ambitious manufacturing goals and a large population needing jobs, the challenge is even greater.
Despite efforts to diversify, India’s imports from China continue to surge. Factors like poor logistics, a lack of specialized industrial expertise, and the lower cost of Chinese goods make it hard for Indian industries to compete, as seen in the domestic solar cell sector.
China’s Economic Overcapacity Problem
Experts point to China’s imbalanced economy as a core issue. China has traditionally focused on the “supply side” – production and investment – rather than boosting domestic consumption.
This approach, often supported by state subsidies, has led to enormous industrial capacity that sometimes exceeds actual market demand. This surplus then drives Chinese producers to aggressively seek external markets, potentially distorting global trade.
Economists are now urging Beijing to shift its focus from a debt-fueled, investment-led model to one that prioritizes stimulating consumer demand to address its domestic economic struggles and avoid exacerbating global trade imbalances.
- The US is increasing pressure on countries to prevent Chinese goods from entering its market through transshipment.
- India faces a dilemma as its imports from China and exports to the US are both rising simultaneously.
- Decoupling from China is challenging for India due to its reliance on cheaper Chinese goods and its own manufacturing sector’s struggles.
- China’s industrial overcapacity, stemming from an imbalanced economy, is a key factor driving its aggressive export strategy.
The unfolding scenario presents a complex economic tightrope walk for India, balancing its trade relationships with both major global powers.
