The Trade Tariffs

Today, the Trump administration has pushed ahead a plan to impose a tariff on additional $200 billion on Chinese goods by releasing a list of targeted products, escalating a trade war between the two superpowers that may soon hit American consumers directly.

How Did The Chinese Market Respond?

The US move sent markets skidding in Asia as Chinese stocks stumbled and the yuan weakened. The Shanghai Composite index fell by 1.9% and Hong Kong’s Hang Seng index was down by 1.4%.

The 10% traffic could take effect after public consultations end on 30 August. The proposed list of goods include consumer items such as clothing, television components, and refrigerators, as well as tech products excluding mobile phones (surprisingly).

Reacting to it, Beijing termed it as ‘Highly unacceptable!’ and said it would promptly strike back with higher duties on an equal amount of US exports.

Earlier Tariffs

Earlier, the Trump administration imposed 25% duties worth $34 billion Chinese imports. The first time the president had implemented tariffs directly on Beijing after threatening to do so for months.

US-China Trade War And Role of India

Now, how does this trade war affect the Indian economy and its markets? Although several countries along with India have conveyed to WTO against unilateral trade measures. Now, according to some experts, levy hitting China’s imports could dent exports. This space can be filled by India.

In the long-term, the trade war is bad news for everyone. Given the interconnected and interdependence of today’s global economy, it is hard to say that it will be an easy-go ride for any nation.

Possible Behaviour of the Market

We can expect the market to remain highly volatile and difficult to predict. We must also see what measures China will take to curb this issue and how it will affect the global economy.

In hindsight, there is also a lurking risk of trade tariffs for Indians goods (just like Harley Davidson saga) by the Trump Administration.

Expert Comments

“We are pretty bearish (on the rupee) at this moment, given all the circumstances combined. Not only high oil prices, but also the trade war that has been taking off,” Hugo Erken, senior economist at Rabobank had told Reuters earlier.

“So, although India has a large internal market, and I still think the Indian recovery will last, the external pressure is really building at the moment. This is not good for the Indian currency,” he added.

“India is obviously one of those countries with higher exposure to commodities, especially oil imports, dragging the current account to a deeper stretch going forward and this is basically negative for INR,” Reuters reported citing Prakash Sakpal, an economist at ING on the trade war.

Disclaimer: The views expressed on this post are that of the author and not those of Groww