An improvement in US-China trade relations has started to hurt India’s cotton yarn exports. The US-China tariff war had benefited India. Between June and September 2018, the US announced high customs duties on several Chinese goods and China retaliated by increasing levies on US goods. Consequently, India’s exports to the neighboring country increased by about 32 per cent during the June-November period. India’s exports of cotton yarn to China in April to November were up 2.5 per cent.

Also, earlier, the Chinese had put duties on American cotton so there was pressure to buy from India. Now the situation has eased. Chinese importers have renegotiated orders of Indian cotton yarn worth $500 million in the past few weeks. Importers, import agents and Chinese bankers have defaulted, renegotiated confirmed orders or even cancelled shipments and letters of credit on contracts without assigning proper reasons.

China is slowing and fears losing competitiveness if the second round of American tariffs, which includes apparel, comes into effect from March. The country may want to cut down on inventory. While China is the largest importer of cotton yarn, with a share of 46.7 per cent globally, India remains the largest exporter of cotton yarn in the world.