India is likely to continue to trade with the US for the next few years, as the Trump administration tries to boost its relationship with the country as it seeks to forge closer ties with China.
That is despite the growing number of trade wars between the US and India in recent years, according to a report by consulting firm McKinsey.
“We are not talking about an open war,” said Vivek Wadhwa, head of corporate governance for McKinsey India, in an interview with The Wall Street Journal.
“We are talking about a trade war that is likely for years.
It’s a very dangerous place to be.”
The Trump administration is working to revive a $1.6 trillion trade pact between the two countries, which is under intense scrutiny by US lawmakers who have criticized it for allowing China to buy US technology.
The Trump team has said it is working on a trade deal with India that would include a $25 billion investment in a new manufacturing hub in Gujarat.
India has already agreed to buy nearly $100 billion in US equipment, technology and other goods.
McKinsey said it expects India to continue its current bilateral trade with China for the foreseeable future, but noted the US-Indian trade imbalance will only grow with the end of President Donald Trump’s term.
“It’s a real challenge,” Wadhwwa said.
“If you’re looking at it from the outside, you might think that the US is a major beneficiary of this, but the truth is that we see a trade deficit with India.”
Wadhwa said it was unlikely that India would get an official response from the Trump Administration in the next several months, but that India’s economic interests are closely aligned with those of the US.
India has a large population of manufacturing workers and is the second-largest exporter of goods and services to the US after China, according a McKinsey report released in February.
That is due in part to its manufacturing sector and its role as a key exporter to Europe, Canada, Australia and the United Kingdom.
In 2017, India’s exports to the United States amounted to $3.3 trillion, according the McKinsey Report, which said it included goods, services and services-related trade.
That was more than the $2.5 trillion in exports to China, the largest of the three major economies.