USA-CHINA TRADE WARS

‘GLOBAL EQUITY INVESTORS UNNERVED BY RE-ESCALATION OF US-CHINA

TRADE TENSIONS’ read the headlines on 3rd August, 2019. How is the Indian economy
affected?
The US and China's escalation of trade tariffs is expected to hit growth in both countries in 2019,
when the boost from President Trump's sweeping tax cuts will also start to wane. Mr Obstfeld
said the world would become a "poorer and more dangerous place" unless world leaders worked
together to raise living standards, improve education and reduce inequality.
In the last one month, the value of the rupee has dropped to an all-time low, when in some
occasions it was hovering around the mid 68s against the US dollar. This coincided with Donald
Trump’s threat of imposing a fresh round of tariffs on exports worth $200 billion. This trend can
be traced to the weakening of the US dollar, which automatically creates a negative impact on
the trade deficit of India, causing a chain reaction of sorts.
Amid concerns over the global trade war, key indices in the Indian share market dropped due to
the cautious approach of the investors. During this period, the BSE Sensex saw regular plunges
in points. NSE Nifty’s performance too was along the same lines as it also saw significant drops.
As of now, the Sensex is trading at about 37,521 (at the time of publication), which is still below
the average.
As the United States of America imposed duties on steel and aluminium, India now has to pay
approximately $241 million worth of tax to the US. India, on the other hand, as a counter-
measure has proposed imposing duties on 30 different types of goods. This will ensure that the
US has to pay about $238 million as duties to India. However, this will make life more difficult
for the end consumers as everything that falls under the tariff scanner is expected to become
more expensive.
Q1. China halting US agricultural purchases would provide no solution to the trade wars. Do you
1. Agree
2. Disagree
3. None of the above
Q2. Several people have talked about the possibility of India benefitting through increasing
exports to the US and shift of FDI to India. According to you, which among these is going to be
most benefitted in India?
1. Job creation and increase in competitiveness
2. India becoming a powerhouse as global hub for exports.
3. Investments from large global companies
4. Becoming a significant part of Global Value Chain (GVC)
Q3. The recent escalation in the US-China trade war has brought forward the next US recession
as being perceived by the economists of Reuters. What implications shall it have on India?
1. Negative due to economic repercussions (fall in exports)
2. India will benefit from it due to the easy money policy by US Fed (more money flows
into India)
3. Depends on the Intensity of Recession.