USA’s Trade War with China is Good for India
06, Feb 2019
Prelims level : Economy
Mains level : Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora.
In News:
- The trade war between the US and China is expected to boost the Indian economy with a rise of 3.5 per cent in exports while the EU will be the biggest winner, taking home $70 billion in additional trade, according to a UN study.
Explained:
- The US and China are locked in a trade war since President Donald Trump imposed heavy tariffs on imported steel and aluminum items in March last year, a move that sparked fears of a global trade war. In response, China imposed tit-for-tat tariffs on billions of dollars worth of American imports
- Countries that are expected to benefit the most from the trade war are the EU members as exports in the bloc are likely to grow by USD 70 billion. Japan and Canada will see exports increase by more than USD 20 billion each, it said.
- Other countries set to benefit from the trade tensions include Australia, with 4.6 per cent export gains, Brazil (3.8%) India (3.5%), Philippines (3.2%) and Vietnam (5%), the study said.
- The UNCTAD study also warns that the spat could hit East Asian producers the hardest, with a projected USD 160 billion contraction in the region’s exports unless discussions between China and the US are resolved before the March 1 deadline.
- The study also underlines the “common concern” that trade disputes have an unavoidable impact on the “still fragile” global economy, particularly on developing, commodity-rich countries that are dependent on exports.
- One major concern is the risk that trade tensions could spiral into currency wars, making dollar-denominated debt more difficult to service,