India mounts surveillance on likely import surge as US-China trade war spirals

Chinese and American goods, meant for each other's markets, could be routed to India via Vietnam, Indonesia and Nepal, three government officials aware of the matter said.

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The US on Wednesday slapped a steep 245% import tax on a wide range of Chinese goods, which could lead to a rerouting of Chinese exports to India. The hostility between the world's top two economies has worsened since the US imposed 145% tariffs on Chinese goods earlier this month. China retaliated with a 125% levy on American imports and also tightened exports of rare earth metals critical to high-tech and defence sectors.

As a first step, India has activated its newly-formed Import Monitoring Committee (IMC), tasking it with keeping a close watch on key Chinese exports to the US—especially electronics, machinery, textiles, toys and solar equipment—that are now at greater risk of being dumped into the Indian market, one of the three officials cited earlier said, all of whom spoke on the condition of anonymity.

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The fear is that in search of alternative markets, Chinese suppliers may flood India with low-cost goods, disrupting domestic manufacturing.

To widen its surveillance net, the IMC has been directed to engage with export promotion councils across sectors, and these councils will be asked to sensitise their stakeholders, including traders, to report any sudden or unusual trends in import patterns, particularly those suggesting the diversion of Chinese goods, the second official said.

In parallel, different ministries, port authorities and air cargo stations have also been asked to stay vigilant and step up physical scrutiny of inbound consignments, this official said.

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“The objective is not only to monitor but to act swiftly if any covert diversion of goods is detected," the third official said.

Queries emailed to the commerce ministry remained unanswered.

The concern grows as India’s trade deficit with China hit a staggering $99.2 billion in FY25—a record gap that reflects deeper structural dependencies, not just trade imbalances.

Imports surged by 11.5% to $113.4 billion, driven by rising demand for electronics, electric vehicle (EV) batteries, solar cells and key industrial inputs—sectors where China dominates India’s supply chains. China is India’s top supplier in all eight major industrial product categories.

What’s more alarming is that India’s exports to China fell 14.5%, dipping to $14.2 billion.

Amid the ongoing US tariff war on Chinese goods, several categories of products that India imports from China have been brought under the IMC scanner. These include electronic components like mobile phone parts, LED products, and solar equipment such as photovoltaic cells and inverters, along with industrial machinery and auto components, among others.

Other categories that would face strict scrutiny include toys, plastic goods, and metallurgical products like stainless steel and aluminium items. Telecom equipment, including routers and switches, and seasonal goods such as decorative items and low-cost home accessories have also been put under the scanner.

“Though the tariff war between the US and China has created an opportunity for India, it also brings the risk of dumping. The US was a major trade partner for China, and under the current circumstances, as Chinese goods face barriers in accessing American markets, they are likely to be diverted to other destinations. India, being a developing economy with a large consumer base, could become a potential target market for offloading Chinese consignments, including those routed indirectly through third countries," said Harsh Bansal, managing director of BMW Industries, a steel processing unit.

“The Indian government has been effectively controlling the dumping of Chinese goods on earlier occasions, and this time too, action will be taken by the concerned government agencies. The proposed safeguard duty on steel is one such step in this direction," Bansal said.

“While this (US-China trade war) presents an opportunity for India to attract fresh investment, it also raises the risk of becoming a dumping ground if safeguards are not put in place swiftly," said Abhash Kumar, assistant professor of economics at Delhi University.

The committee, which is headed by the Union commerce secretary, has officials from the ministry of commerce, the Director General of Foreign Trade (DGFT), Central Board of Indirect Taxes and Customs (CBIC), and Department for Promotion of Industry and Internal Trade (DPIIT). The IMC will also closely monitor the potential influx of agricultural products from the US and various merchandise from China.

The commerce secretary will review the committee's report every week, and based on its findings, necessary measures may be implemented to check the import of goods from China, as reported by Mint on 15 April.

As per a Global Trade Research Initiative (GTRI) report, a steep 245% import tariff imposed by the US on Chinese goods has created a rare, short-term opening for India’s small manufacturers, potentially unlocking a $100 billion export opportunity. Everyday consumer products that were once cheaply sourced from China will now be significantly costlier in American stores—giving Indian small and medium enterprises (SMEs) a real chance to step in.

In 2024, the US imported over $148 billion worth of such products, with China alone supplying $105.9 billion—nearly 72% of the total. India’s share was just $4.3 billion, or 2.9%. With Chinese goods now sharply more expensive, a large gap has opened in the US market, as per the GTRI report.