US is getting ready to build bigger tariff walls on its east coast and retaliation from China is but natural. The supply chain across the globe is under threat so are the markets that will take the heat of collateral damage.
India will not be able to stay neutral either. If and when US starts applying provisions of Section 302 almost all imports into US, from Shoes to electronics will be facing punitive taxation. While US is ensuring that WTO remains toothless the broken supply chains will cause disruptions that have that will spill into Indian markets.
The first wave will be that of Dumping. Once the Chinese warehouses start to overflow, the dumping will hit Indian market, destroying our local productions for over two quarters. Even if India puts anti-dumping duties, most of the goods will be rerouted through India’s SAFTA partners. The flooding of Indian markets will severely compromise short term stability of entire economy.
The second wave will be that of realignments. Once the trade wars start, and we hope that they don’t spill to real wars, everyone will be required to take sides. On one side will be the dragon breathing fire of manufacturing power, on the other side there will be the world’s sheriff – still holding most lucrative contracts. While China is India’s principal import partner, US is where Indians export their services.
Given the way Indian believe in non-action it would help Indians aligning with other nations which are all set to loose in this conflict. Indian commerce ministry along with its diplomatic services need to gear up for the looming threat. Suresh Prabhu might be just the right the man for the challenge, but it needs to be driven by the Prime Miniter himself. The response plan need to include Industry stalwarts, friendly countries, diplomatic service even intelligence agencies. This is a time that could prove be the time when India can truly shine and ride the waves instead of being buried by it.