The war is on. In what seems to be like a never ending war affair between the USA and China, another addition has been made on the part of USA’s story, with tariffs being imposed on yet another set of imports on Chinese products worth $16 billion. China wouldn’t keep mum and is planning to retaliate with an equal amount of import sanctions.
Background:
As per USA’s allegations, China started making Chinese products more expensive to buy for American consumers and businesses. USA, in order to punish China for the act, imposed sweeping tariffs on $34 billion worth of Chinese products. China accused the USA of starting the “the largest trade war in economic history to date” and retaliated by imposing 25% tariff on the same $34 billion worth of US goods.
USA China Trade Relations Comparison:
(Data Source: https://www.census.gov/foreign-trade/balance/c5700.html)
Two of the biggest economies of the world have locked horns and there has been a clear fall in both, the exports and imports between them.
Points of Concern:
According to Wood Mackenzie, while China could secure crude oil from alternative sources such as West Africa which has similar quality as US crude, the US would find it hard to find an alternative market as big as China.
There is a lot of uncertainty with respect to how the ongoing retaliatory tariff impositions between the US and China pans out, says economist Upasna Bhardwaj of Kotak Mahindra Bank, adding, “So, in that sense, investment across borders is likely to get impacted.”
One of the major point of concern for India would be, the further weakening of the Indian rupee due to global trade tensions.
How can India react?
The exports and imports of India constitute 42% of its GDP. India can become more competitive in segments like garments, textile, gems and jewellery since India already has an edge there.
Closing Note:
The current global economic order is in danger of being dismantled and the upshots might not be a very pleasant one not only for the economies but also for areas like geopolitics.
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