News Analysis |
Apex Indian trade association ASSOCHAM, on Sunday, said that if the tariff war between the United States and China escalates into a full-scale global trade war, it would result in collateral damages for the Indian economy as well.
The country’s exports will take a hit, the current account deficit will face pressure, and the Gross Domestic Product (GDP) will take a setback. “If the tariff war escalates into a full-scale global trade war, it would have a collateral damage for the Indian economy as well, with the country’s exports taking a hit, current account deficit facing pressure and the GDP taking a setback,” the chamber said in a statement.
It said that the measures taken by the US may not have a direct impact on India but the collateral damage could be in the form of adverse impact on the overall sentiment. ASSOCHAM secretary general D S Rawat said, even if India chooses to take a responsive action on its imports, the impact on “our exports could be more even as the volatility in the foreign exchange rates would also rise.”
It can be indicated that the Indian pivot to a Trump led USA will garner no benefit for India. As engagements of other countries with the US such as Pakistan, any benefit of such an alliance is temporary while the drawbacks are rather more permanent in nature.
He added, “We must have a backup plan which should include opening bilateral trade with key trading partners, taking precaution that we remain World Trade Organization (WTO) compliant.” In case the market confidence is further eroded, there would be outflow of portfolio investment taking a toll on the dollar rates. Besides, as the US dollar is used as a safe haven in the midst of global uncertainties, its increased demand would put pressure on the Indian currency along with those of the other currencies of the emerging markets.
“It is no more a scenario where it was considered only a threat. The US administration has started signing the orders on tariff revision and other protective measures. In the process, the influence of multilateral organizations like the World Trade Organization is also on the wane. When countries get into this kind of a slugfest, the multilateral regime takes a big knock,” the chamber said.
Read more: India refuses to condemn Trump’s Jerusalem decision
United States President Donald Trump on Thursday imposed massive trade tariffs amounting to USD 60 billion on China. Terming Beijing as its efforts to steal ‘intellectual property’ from American companies, President Trump signed a memorandum directing the Office of the US Trade Representative (USTR) and the US Treasury Department to launch a ‘broad range of actions’ against China. The US President alleged that China had been indulging in tremendous intellectual property theft worth hundreds of billions of dollars on a yearly basis.
During an event at the White House, Trump said that imposing tariffs on China is “going to make the US a much stronger and a much richer nation.” The US President called China as a “friend” but demanded that Beijing should adopt more favorable trade practices with Washington DC.
Apex Indian trade association ASSOCHAM, on Sunday, said that if the tariff war between the United States and China escalates into a full-scale global trade war, it would result in collateral damages for the Indian economy as well.
Any impact on the Indian economy by Trump is deemed to have negative fallout for the current Hindutva led government of Prime Minister Narendar Modi. He has already been under fire for the declining exports as well as the slowdown of the Indian economy. In response he used diversionary tactics like creating tensions with archrival Pakistan and targeting minorities within India such as the Muslim community. It is projected that any such adverse impact especially with the Indian election coming closer can lead to more regional and internal tensions.
Read more: Trump slams Pakistan; calls upon India to help in Afghanistan
Trump’s popularity within India is also expected to take a hit. Initially buoyed by Hindutva sentiments, Trump was a favorite due to his Islamophobic designs. However, after his presidency a slew of incidents have caused a downward trend in favorable expectations. One of the first incidents was the killing of Indian IT experts in the US by Anti-immigration Trump supporters.
In the end, it can be indicated that the Indian pivot to a Trump led USA will garner no benefit for India. As engagements of other countries with the US such as Pakistan, any benefit of such an alliance is temporary while the drawbacks are rather more permanent in nature.