India has not gained much from a drop in China’s share in American imports, despite New Delhi’s close diplomatic relation with Washington and a recent push to boost its own local manufacturing base, a study by Rabobank shows.
The South Asian nation saw only a slight increase of its share in shipments to the U.S. last year, according to the Rabobank report, as a trade war with China pushed American companies to diversify their supply chain away from the world’s second-biggest economy.
“One of the reasons why India hasn’t benefited more is because the largest shift is found in the computer and electronic products sector,” economists Ralph van Mechelen and Michiel van der Veen wrote in the note. That is “an industry that is relatively small” in India at the moment.
Manufacturing imports to the U.S. from China dropped by 17% or $88 billion in 2019, they said. That’s resulting in a decline of China’s share in American imports by 4 percentage points. Besides the trade war, the coronavirus pandemic has increased pressure on firms to reassess their supply chains, according to the report.
“Vietnam, Mexico and Taiwan are the main beneficiaries of the shift in U.S. imports,” along with a push toward reshoring back to the U.S., the economists said. “Going forward, we see the expected rise in geopolitical tensions as the most important reason for a further acceleration of supply chain relocation in a wide range of sectors.”