The last 24 hours have been pretty tense for entire business and investors community all over the world. An ugly, and dirty trade war has been triggered between these two economic superpowers, and stock exchanges all over the world have tumbled.
The question is: How will India be affected in this business battle? And what should India do to avoid any loss?
The US, China Fight It Out In The Open
Yesterday, US President Trump announced tariffs up to $60 billion on major Chinese products. This means that tax on the import of these products would be massively increased, in order to discourage them inside the USA.
If a product which costs $10 right now to import from China suddenly becomes $100, then the companies and consumers using them will think twice, thrice; and this is exactly what US President Trump wants.
As per Trump, Chinese companies have been stealing intellectual properties of US firms, and then selling them at a higher price back to Americans, which is ‘not fair’.
He said,
“They are helping us a lot in North Korea. But we have a trade deficit … there are many different ways of looking at it, but no matter which way you look at it, it is the largest trade deficit of any country in the history of the world.”
China has retaliated instantly, without wasting any time.
China’s Commerce Ministry has said that they will now place increased import duty of 25% on several popular American products which are imported into China.
Some of these include U.S. pork imports and recycled aluminium; wine and fruits from California and more.
On the other hand, US tariffs on Chinese imports will be mainly on technological products. The list will be announced in the next 15 days.
Stock Markets Feel The Heat; Investors Lose Money
As soon as US and China announced their respective declarations to increase import duty, stock prices across major exchanges took a major dive.
The Dow Jones Industrial Average, the exchange of 30 biggest publicly traded companies in the US lost 724 points, or 2.9%, which is their 5th largest dip, in the entire history.
The S&P 500 lost 2.5% points and the Nasdaq 2.4%.
The negative effect was witnessed across Asia as well. Hong Kong’s Hang Seng dropped 3.4%, meanwhile, China’s CSI 300 index of mainland-listed stocks shed 3.1%.
In Asian stock markets, technological stocks faced the biggest fall.
Will This Trade War Impact India?
For Indian businesses, the biggest and most prominent question is: How will India’s commerce and economy be impacted?
The exact answer will be visible in coming days, but on a first look, it looks bleak and dark.
Last year, India and US conducted a trade of $67 billion, which included both exports and imports; whereas, with China, we conducted a total trade of $71.48 billion last year.
While China is our #1 trade partner, US is at #2.
And when these two countries have pointed guns at each other, then India is bound to suffer in the cross-fire.
Last year, India had imposed an anti-dumping duty on 90+ Chinese products, which was seen as an act of protectionism, and to stop the invasion of cheap Chinese products.
And, in the past, India has condemned the US for employing protectionist measures for their own employees and their own products.
Meera Shankar, former Ambassador to the US has said in the past that India has enough safety measures to stop the impact of a trade war. She had said,
“For India we have enough safeguards. That should provide protection against dumping. There are other markets outside US as well..”
Meanwhile, Gurcharan Das, former CEO of P&G said,
“For India, it is a sad thing. We cannot grow on a sustained basis until we export. We are the one who desperately need open trade.”
Here are some more reactions, which came the issue started to gain momentum around 10 days back.
Industry watchers are saying that India needs to keep its boundaries and markets open and encourage the concept of free trade. In case the situation worsens, then this free trade policy will help us to forge alliances with other countries.
We will keep you updated, as more details come in. Do share your views on this trade war, by commenting right here.