India may gain from trade actions against China: IMF

NEW DELHI: International Monetary Fund (IMF) chief economist Pierre-Olivier Gourinchas on Tuesday said India may benefit from tariff and other actions against China.
“India is already benefiting from large FDI inflow since 2020… Countries that are not very connected with China may be in a position to benefit more if the measures (higher tariffs) are extended to countries that do a lot of trade with China… India is in that space,” he said at the TN Srinivasan Memorial lecture, adding that the gains from trade may not be so large.
The US and EU recently announced higher import duties on some Chinese products and FDI from China is already facing heightened scrutiny in several parts of the world.
Gourinchas cautioned that fragmentation can impact trade flows, capital flows and labour flows. In the short term, it may affect supply and inflation. Global cooperation may be more difficult to address challenges like climate, debt problems or technological changes.
He said there is an emergence of connector countries, such as Vietnam and Mexico, which are gaining market share in US imports and they have received more FDI and exports from China since 2017. Countries that export more to the US are importing more from China, not just at the macro level but even in certain product categories. “You see the same thing for FDI — more FDI from China into a country translates into more export from that country to the US,” the IMF chief economist said.
He, however, cautioned that the diversification has resulted in lengthening of the supply chain, and not necessarily a reorganisation of the supply chain. “Trade flows are making more stops.” He also said some of the financial flows are re-routed through offshore financial centres. “The cost of fragmentation is difficult to estimate. A number of countries that remain non-aligned can benefit,” Gourinchas said.