Dumping concerns amid trade war and India-US trade deal

The trade war initiated by the US has taken several twists. Now, the US imposes a baseline tariff on almost all countries, while the tariff fight between China and the US has escalated further. In this analysis, using a global CGE model, we find that though the tariff escalation between China and the US would be economically beneficial for India due to increased domestic demand, to reap greater gains, India should go ahead with deeper tariff cuts. A tariff cut of 25 for all countries would expand India's economy two-times (2.62) vis-a-vis expansion in no-action scenario (1.31). A comprehensive India-US FTA may accelerate India's growth but, in its backdrop, dumping probability from China also rises, as bilateral total imports from China increase by 14. The dumping from China may put the domestic industry at a disadvantage, as in India, dumping cases related to Chinese firms already occupy a major chunk of all dumping cases. Therefore, we propose a systemic approach to deal with dumping threats from China, which is unilateral tariff liberalization by India for all trading partners, excluding China. Such a policy does not affect India's welfare much, but bilateral imports from China fall drastically. Hence, the dumping probability would also be dialed down with fewer bilateral imports. The other key macroeconomic variables for India, like the GDP, sectoral outputs, aggregate exports, and domestic demand, do not fall significantly due to this policy action.