As the trade deal talks between US and China go out of order, the global spotlight has, once again, been trained on the possibly inescapable trade war between the two economic giants—US and China, who account to almost about 40 per cent of world’s GDP. The trade war between the two countries gained a drastic momentum when US President Donald Trump announced increased import tariffs of 25 per cent on $200 billion worth of Chinese goods, blaming reluctance of China towards forging a balanced trade deal.
Interestingly, Sir Isaac Newton, in his third law of motion, said, “every action has an equal and opposite reaction.” So, the series of foisting tariffs did not end up with US tariffs on Chinese goods. Rather it invited retaliatory tariffs with China imposing increased tariffs on $60 billion worth of US imports. As two are refusing to take one-step back, precisely both the countries are handling it as the matter of prestige.
In the US, Presidential elections are due in next year. For Donald Trump, a lot is on stake. Winning over China and nailing a balanced trade deal with it can help him peerlessly in the next Presidential elections. Unlike, for China, though it may not be a matter of elections but certainly a matter of its global prestige. But, their matter of prestige is, indeed, a pain in the neck for the rest of the world.
The latest statements coming from President Trump are, conspicuously, pointing towards an ensuing formidable situation in terms of global trade. It is worth mentioning that the trade battle between the two countries set off last year when Trump inflicted Chinese steel and aluminium imports with heavy tariffs, inviting quick and retaliatory tariffs from China as well. Henceforth, the trade situations became grave and grave with each passing day, allowing counter statements from both sides and, thereon perhaps, lingers the noose of an unwanted trade war situation over the world economy.
Trump appears to, assertively, rationalise his tariffs by putting forward the concerns of American businessmen, saying the US is, painfully, bearing a yearly loss of a whopping $375 billion owing to Chinese imports, hence China must compensate that loss. And, to circumvent the current daunting trade situations, China must either initiate and show conciliatory overture by removing heavy duties from US imports or expect further tariffs on its goods being exported to US.
In this crux for global trade, India enjoys no exception. In essence, the sparks emanating from the trade battle between the two economic giant may hurt Indian interests too— in one way or another. The two sides failing to figure out a concrete solution to the ongoing perturbing logjam may cause a significant rise of interest rates in the USA, followed by the outflow of institutional investors from India, leaving behind a hobbled share market.
If those predicaments are anything to go by, the most ardent allies of USA, especially European Union, may follow the same stance of conservatism in the days to come, as the US seems to tread on today. And, if the EU embarks to tread on the same trajectory, Indian exports to Europe may suffer adversely. In addition, a global recession can be the eventual outcome if these trade deadlocks remain persistent any longer, resulting in high crude oil prices, and thus, stoking higher inflation.
Although, in order to cease a few favourable opportunities in the persisting trade impasse, India handed China a list of about 380 products that China can import from India, but China, if it does, will probably import only those products which it may not get from the USA such as medicines, agro products like Soyabean.
Trump also tried to weigh India in the same scale as he assesses China, by foisting heavy import tariffs on Indian steel and aluminium, an unnecessary move that saw an equal, opposite and, at the same time, an appropriate response from India.
As the ongoing US-China trade scenarios are taking a drastic turn with each passing day and bode ill for near future trade prospects, India, in this backdrop, must buckle down and should not delay in taking some immediate and infallible steps to take it all in its stride.