US CHINA TRADE WAR IMPACT ON INDIA
US CHINA TRADE WAR
The two major economies of the world witnessing a trade war after US president Donald Trump imposed tariffs on 250 billion Chinese goods. The Trades Representative office of US claims that China is limiting US exports by unfair means. In response to this, the Chinese Government released a statement that “The USA precedented biggest trade war in economic history”. In addition to this, China also imposed tariffs on US goods.
What is a Trade War?
Trade War is an economic conflict situation that develops between countries where trade barriers are imposed by one country in response to the barriers executed by others.
US China Trade War Impact on India
A rift occurred due to the US China trade war. The US seemed to be initiator here. Their mindset of aggressively targeting China and heavily raising the tariffs on Chinese imported goods enabled China to retaliate. While this may undermine the two economic giants, India can look forward to some potential gains.
FACTORS FAVORABLE TO INDIA
Indian Industries can benefit from the ongoing Trade war. According to Sher Mehta(Director of Macroeconomic Research and Econometrician, Virtuoso Economics), India can greatly benefit from China’s commodity market. Indian exports to China in this category can be a lucrative proposition, given that the US exports a substantial amount of commodities to China”
Also, Major Chinese firms are looking for other countries to invest in to minimize their risk. Other International investors are looking for non-volatile economies unaffected by the Trade war. Investors suspect decreasing prospects of de-escalation between the two counties. While India and China were always suitable for their long term viability, the current scenario has driven many potential Chinese investors to India. All these factors make India favorable.
WHAT INDIA NEEDS TO DO
A clear approach is needed to fully benefit from US China trade War. Indian government must strive to become a significant exporting economy and stand out from among other advantageous countries with large markets. To do this, India must focus on linking up with GVC’s ( Global value chains). India’s potential of doubling its exports and increasing its jobs partially relies on this.
India must also focus on having improved support policies to attract Global companies. Also, India must be actively looking for favorable opportunities. The recent threat of China to cease exports of Rare Earths to the US( of which it commands 95% of the world’s supplies) sparks demand from alternative countries. India can capitalize on such sudden demands.
Roadblocks for India
India also has to face pressure from the US. Trump’s announcement of denouncing India’s Generalized System Of Preference that is GSP status, will benefit other GSP countries.
India must hence act in a clear and strategic manner to fully capitalize on the benefits present in the current scenario and become a dominant exporting entity in the global economy.
How can India Increase their Exports
- World class port facility needs to be developed.
- Labour intensive industries should be given preference.
- Skill development programs shall produce skilled workers in a rapid time phase.