Tariff imposed on 75 countries by US president Donald Trump has definitely pushed the globe towards a Global Economic Crisis . By giving 90 days relaxation on this tariff it is clear that this is not only the matter of balance of trade .
This is the hidden war between two super power of the world in which tariff is used as a weapon for the war . In the last three decades China has become the 19 trillion dollar economy by means of export only . 30 trilllion economic power America want to curtail China power and growing economic activity all over the world . Trump want to supress China ‘s economic growth and By imposing economic tariff this is the first step in this trade war .
The supermacy war between the two superpower will worst impact the whole world . Some specialist believe that it will also impact the supply chain and can lead to Global Recession .
How China – America supremacy war will impact the whole world is now a question not only for the Investors and businessman but also for the Developing Economy ?
Bilateral trade between US-China
Export of 440 Arab dollar from China to USA .
Import of 145 Arab dollar from Usa to china .
The Business deficit of USA is about 295 Arab dollar .
Contribution of US- China In Global Economy is about 43% of total Economy . US is the largest Economy with 29 trillion Dollar GDP . Whereas China is the 2nd largest Economy with a GDP of 18.28 Trillion Dollar .
According to IMF , US – China contribution in global economy is about 43 % . If the trade wars begins between these two superpower it will hamper the growth rate of both the country and will impact other economy also .
Also there is a negative impact on Global Investment . China is the largest manufacturing hub , and by giving different types of aids it makes the production of commodities cheaper than the other country .
Due to tariff , imposed by china on these china dump these products in the other country , that will hamper the production of those country’s and their economy . In the first term when Trump imposed 20 % tariff on china the prices of goods was rised . so 125% percent tariff on China can inflate the price of goods to multiple times . the tariff imposed on US by China will also had a negative effect on china .
Us will pressurize other countries like Combodia , Maxico and Vietnem to not hold any trade relation with China .
Impact of Trade war on Indian Economy :
The manufacturing Hub of India rely on the chinese components specilly in the field of pharma , electronics items , fertilizers sectors etc.
From Battery components to semiconductor panel most of the electronics components all are imported from China . It will become costier if these trade war continues .
India is a leading pharma producer , But the raw matarial for pharma industry solely depends 70 percent on chinese import . If the supply chain abrupts it will not only increase the production cost but , also export of pharma will be affected , and this will have a negative impact on world generic pharma market .
Also their will be more pressure on steel producers , because China can dump their steel products in India and the price of steel will fall significantly and the steel production sector will face margin safety .
Only industry which will get benefited from The trade war is IT and Tech Industry . Last time when there was war between US and China the industry get benefited was IT .
US can increses their outsourcing from India , specially for backend operations , Software Development , and for AI support .
This can be also seen as an opportunity for Agriculture Sectors . if China is not able to sell their agri product in US , it will be a golden opportunity for India to Capture the US Agri Product Market .
Indirect Export of Chinese items –
There is an increase in the indirect export of chinese items because china can no more able to sell their items in US after 125% hike in tariff . Chinese products specially Raw products will dumped into another countries from their they will labled and sell to US .
Last time China has violated the trade law “ Origin Of Products “ and the chinese products are indirectly exported to US . During these phase of trade war Many country will import chinese Items and some value to that and try to export them to US . Here is a chance of India that they Import Chinese items and add some values to them and export them to US. By doing this India can be benefited from this .But here India has to be more cautious about their fairness of trade like chinese products can be packed or labelled in India and exported to US , and these type of items are if identified than this will become more challanging for India .
Will Trump tariff policy affect the Indian Monetary policy ?
From the highest of 88.10 in february dollar is down by 2 point against Indian Rupees . American president Donald Trump tariff policy has not only turmoil the industrial market , but also has a impact on different currencies .
Last time on 28th february when Rupees touches the level of 87.40 against the dollar , some specialist suggest that it will touches the level of 90 in a few couple of weeks . but now they suggest that Rupees can sustain at a level of 86.50 or below in the near future .
Definetely , this is a good news for RBI as now RBI need not to use Foreign Exchange Reserve to stablize the Rupees against dollar . If the value of dollar falls , it will easy for RBI to manage Inflation . Also it will have a positive impact on trades and productions .
When the dollar is strong against the Rupees the price of imported items become costly and the sector like pharma , renewable sector , fertilizers sectors etc get affected the most , but there is a positive impact on IT and tech sectors , and also for the export sectors .