The ongoing US-China trade war has resulted in a cold phase of relations between the two superpowers of the world. But this shift in sourcing represents a unique opportunity for companies in India to gain and keep market share which would not have been readily available to them were it not for the trade war between the US and China. A report.

Foreign relations are tricky. And when the goals and objectives of two superpowers vie for strategic advantage, foreign relations can quickly turn into an adversarial competition. Of course, some competition is benign, as the recent Olympics -- while some are not. However, what seems plausible is that relations between China and the United States have entered a cold phase of relations.

But the larger question is whether cold relations represent a Cold War in the sense of relations between the United States and the former Soviet Union. I think a Cold War analogy may be pushing the very term a bit too far. Still, it wouldn't take too much for both countries to find themselves embroiled in disputes beyond who ran the fastest 400 metres at the Olympics.

A Cold Trade War

Yet, a trade war does exist between both countries. The trade battle was a strategy initiated by the Trump administration and continued with the Biden administration -- and all along contested and countered by Beijing. For both countries, there is much to gain via a trade war: national pride for one thing and manipulation of public opinion for another. Indeed, both countries have many problems that are easy to blame -- distracting public attention from real domestic issues requiring fixing. While also playing to the nationalistic tendencies of people in both countries.

Cold. That sums up where relations between the United States and China are now. Sure, both countries are preoccupied with the pandemic (who isn't?). Still, relations between the two countries remain frosty, at least outwardly. In many ways, relations between these two great powers follow a script we've seen many times in history as a rising power challenges the perceived dominance of an established one.

Even so, playing the blame game is also a formula for conflict. And this is a game that history shows sometimes doesn't turn out well for the parties involved. Stuck in the middle of this are both country's economies. After all, they remain intertwined in many ways. Despite high tariffs and angry wagging of tongues by politicians from both countries, the economies depend on each other. And when it comes to interdependency, no industry is more intertwined than textiles and apparel.

Dodging Icebergs

Our industry has struggled to navigate through relations between both countries like a ship attempting to dodge icebergs. For instance, the Trump administration starts the trade war by imposing tariffs on many imported products from China, including textiles and apparel, only to have China respond in kind. Gyrations ensue with more tariffs levied on some products while others, reduced. And then the Biden administration continues the trade war. But, unfortunately, the seas are not calm.

Some in our industry hoped that Biden would ease off from the heavy-handed ways of Trump. Still, when it comes to trade, Biden has maintained the previous administration's policy. Perhaps there are back-channel discussions that we know nothing of, but if that's the case, such interactions have not leaked to the press. Beijing, in turn, has remained defiant. Consequently, it seems that the trade war is as cold as the overall relationship between the two countries. So, lookout for the icebergs!

Icebergs notwithstanding, our industry has begun the tedious process of diversifying its sourcing. Buyers in both the US and Europe are shifting sourcing to other countries while maintaining a significant position in China -- a hedging strategy, plain and simple.

Beneficiaries

As a result, some countries have gained from this shifting business. For example, Vietnam, Bangladesh, and India have all benefited in a significant way. Other countries with a smaller textile and apparel footprint have also profited, such as countries in Central and South America and North Africa, to name a few.

But this shift in sourcing represents a unique opportunity for companies in India to gain and keep market share. That would not have been readily available to them were it not for the trade war between the US and China. India's time may be now. Of course, the pandemic complicates matters, but India could be on the verge of a breakthrough in global trade. Let's look at the latest US trade data, and you'll see what I mean:

The tables above show US imports of from the world and the top ten suppliers of aggregate textiles and apparel; apparel and non-apparel; and made-up textile products. In every case, India is a top-ten supplier. But except for apparel, India is the second largest supplier to the US after China, but India’s rate of growth in each case is greater than that of China. It’s the rate of growth that I find compelling and worth watching. In aggregate, for the 2021, the rate of growth in US imports of textiles from India has soared 10 percent more than China.

For sure, India’s gains reflect the strength of India’s textile industry and home textile sector. With a technologically advanced textile industry, it is not surprising to see India show renewed vigour in global export markets. Moreover, the data suggest that although India remains the dominant supplier to the US, other suppliers -- led by India -- are enjoying accelerated growth rates and reflect buyer interest in diversifying their sourcing options. The speed by which this diversification occurs will depend upon several factors including, at least on the short run, the veracity of the pandemic, product availability, shipping and logistical efficiencies, and consumer demand in major importing markets like the US and Europe.

Optimistic Outlook

Think about it -- this success occurs at a time when a full-blown trade war between the U.S. and China continues without indication of abating any time soon. What an opportunity. So many people around the world have been saddled with the untold horrors of the pandemic. There’s not a lot of for anyone the cheer these days – at least until the pandemic passes. But at least in the case of Indian textiles, real progress and measurable results underscore the success of so many companies. For this, there is much to be proud of– but it is also a clarion call to do not give up and work even harder against the competition.