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Side effects of Trumps trade wars

China may be the key opponent is Trump’s trade war, the ball will not stop rolling between the two economic giants. US absorbed 16% of all Indian exports while 17% of all imports came from China.

That makes China to be our largest import partner while US the largest export market. Now we have a scenario where US is putting up a walled garden around its economy while Chinese will have over production. Put simply our exports are slated to potentially fall while the imports from cheaper Chinese producer can destroy local industry.

As Chinese steel was turned down from US market its finding new destinations.  India, which had been a net exporter of steel, witnessed a rise in imports in the first quarter of this financial year, making it a net importer, now. Reuters has reported that a government source said that India is planning to impose “safeguards” on steel imports if the volumes coming into the country increase beyond a certain level. The source did not specify the measures that would make up the safeguards but said steps were under discussion.

On monday Government of India recommended imposing a 25 percent duty on imports of solar cells and modules from China for one year to try to counter  a threat to domestic industry while today decision to increase basic customs duty on readymade garment was incremented from 10% to 20% bring cheer to local industry.

While on a tactical basis New Delhi is responding with trade barriers, the strategic approcah remains to lower them. On 2 Jul itself, India lowerd taxes on over 3,000 articles imported from China. 

n a move set to boost India-China trade, the government on Monday announced the slashing of import duties on as many as 3,142 items from China and 5 other nations from the Asia Pacific, days after Beijing had done the same for more than 8500 items.

The reduction in tariff by both nations are part of their commitments to liberalise trade further through the Asia Pacific Trade Agreemment (APTA) and will be in effect from July 1. This is expected to reduce the trade exposure of both nations to the United States and has come at a time when the Donald Trump administration continues to threat both nations with high tariffs and reduced market access in the form of ‘reciprocal tariffs’.

While we have no idea what transpired at Modi-Li personal talks, such treated while the dragon is being contained by the bald eagle may not work in India’s favour.

There is a lot to learn from China, on how to develop one’s own industry. And any Chinese businessman would say that its fool hardy to now compete with Chinese manufacturers in an open economy. India needs to find its space in world conomy and fast. WTO is all but dead and only bilateral trade is the short way forward. Like the Garment manufacturers, Indian industry needs more protection, not less. The war has already come to us, it will serve us well if we choose to fight




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