India fears U.S.-China trade war will lead to dumping of Chinese steel

India fears after the United States raised tariffs on Chinese products due to the escalating trade war between the world’s two largest economies China could soon start flooding excess steel into its market, according to three government sources and four industry officials.

As a result, the Indian steel industry has asked the Indian government to put in so-called safeguard duties of as much as 25 percent to protect it from growing imports. These would be imposed on steel that the government determines has been dumped in India at prices below the cost of production.

China and the United States have been locked in a trade conflict as Washington seeks to fix the trade balance, currently tilted in favor of Beijing. The two nations have raised or threatened to raise tariffs on each other’s goods, moves that could re-draw trade flows and that have threatened to derail the global economy.

“China has excess steel capacity and there is a concern they could re-route it through other countries like Vietnam and Cambodia into India,” an Indian government source with direct knowledge of the matter said.

India, the world’s second-largest steel producer, turned net importer in the year ended March 31, 2019, after a gap of 3 years. That is because the country lacks the capability to produce high-quality steel and has lost some of its global clients to cheaper exports from China, Japan, and South Korea.

Seshagiri Rao, joint managing director at JSW Steel Ltd said, “China, Japan, Korea which are major exporters to the U.S., Europe, and Canada, because of trade actions, they are also diverting steel into India.”

India’s trade deficit with China jumped more than 9 times over the past decade to $63.05 billion in the year ending March 2018.

With the latest U.S. tariffs on Chinese goods, India fears Beijing could also re-route exports of electronic items, toys, furniture and organic chemicals to India through other Southeast Asian nations.