The Indian chemical industry is set to gain from the United States recent decision to impose strict tariffs on China, Canada, and Mexico, according to a report by Prabhudas Lilladher.
The report highlighted that Indian chemical exports to the US could see a rise as American companies seek alternative suppliers to replace Chinese imports.
It said "We believe that USA levying severe tariffs on Canada, Mexico and China may benefit export to USA market for Indian chemical companies as they may seek alternative to China".
The US has levied a 20 per cent tariff on Chinese chemicals, making Indian companies a more attractive option. Since India faces only a 10 per cent retaliatory tariff, it enjoys a 10 per cent cost advantage over China in the US market.
This could significantly boost India's chemical exports, particularly in segments such as dyes and intermediates, agrochemicals, inorganic and organic chemicals.
The US is India's largest importer of chemicals, accounting for 14 per cent of the country's total chemical exports. In the financial year 2022-23 (FY23), India exported USD 3.85 billion worth of chemicals to the US. However, in FY24, exports dropped by 26 per cent, although the US still remained the top destination for Indian chemicals.
The report also draws a parallel with the 2018 US-China trade war, which had also benefited India. During that period, India's total exports to the US increased from USD 57 billion to USD 73 billion as American companies shifted their sourcing away from China.A similar trend is expected now, with the latest tariffs prompting US firms to look at India as a reliable alternative.
India exports chemicals to over 175 countries, including major markets like China, the US, Brazil, the Netherlands, Saudi Arabia, Indonesia, the UAE, Japan, and Germany.
While the increased tariffs on China could open up opportunities for Indian exporters in the US, the report also warns that India and other non-US markets could see an influx of cheap Chinese chemical imports, as China looks for alternative buyers.With the US looking to reduce its dependence on China, Indian chemical exporters have a strong opportunity to expand their footprint in the global market. The coming months will determine the extent to which Indian companies can capitalize on this shifting trade dynamic.
