The ongoing trade war between the US and China has intensified after President Donald Trump imposed a 20% tariff on all Chinese imports. This move is impacting several industries worldwide, including India’s chemical sector.
Increased Competition for Indian Chemical Exporters
Experts warn that these tariffs could lead to an influx of cheaper Chinese chemicals into non-US markets, increasing competition for Indian chemical exporters. Since China is unlikely to reduce its production capacity, its chemical companies may look to offload excess supply in other regions, creating pricing pressure for Indian firms.
US: India’s Largest Chemical Importer
In FY 2023-24, the US imported $2.9 billion worth of Indian chemicals, making it India’s largest chemical importer. This accounted for 14% of India’s total chemical exports, which stood at $20.4 billion, according to Chemexcil (Basic Chemicals, Cosmetics & Dyes Export Promotion Council).
Other major importers included:
- *Brazil
- *The Netherlands
- *Saudi Arabia
- *Indonesia
- *UAE
- *Japan
- *Germany
- *China
Chinese Companies to Target Alternative Markets
Swarnendu Bhushan, Co-head of research at PL Capital, predicts that Chinese manufacturers will continue production despite US tariffs. He explains that if Chinese firms cannot sell in the US, they will shift focus to non-US markets, heightening competition for Indian chemical companies in these regions.
Potential Price Inflation and Price Wars
According to Kotak Institutional Securities analysts, while the US tariffs could help Indian chemical companies compete better in the US, they might also trigger price inflation and intense price wars in alternative markets.
One of India’s leading chemical exporter, Aarti Industries, sent 24% of its total exports to the US in FY24. Other major exporters, Vinati Organics Ltd and Navin Fluorine International Ltd, also have significant exposure to the US market.
Risk of Reciprocal Tariffs Hurting Indian Exporters
Another challenge is the possibility of reciprocal tariffs by the US. Analysts at Kotak suggest that the Trump administration could increase import tariffs on Indian chemicals by 600 basis points under its reciprocity principle.
If this happens, Indian chemical exporters like PI Industries Ltd and Vinati Organics—which have high dependency on the US—could suffer significant profitability losses.
As reported by newsbytesapp.com, as the global trade environment shifts, Indian chemical companies must navigate increased competition, potential price pressures, and policy risks to sustain their growth in international markets.
