US-China Trade war: Is there an opportunity for India?

The US- China trade war is a fight that has been going on since quite some time now where the two largest economies of the world are trying to destruct the rival’s economy. It was first initiated by the current president, Donald Trump. What started off as an initiative to save the US economy from being ripped off due to the so-called unfair trade practices by China, seems to be backfiring now. The countries seem to be in a wedlock of export and import with China being the largest exporter and the US being the largest importer, thus contributing to their large economies. The trade war that started in the 1980s still seems to be continuing despite the intervention of other countries and the world trade organization. This week precisely the US has imposed a Tariff of 15% rise on Tariffs that is from 10% to 25% on a range of consumer goods, and China, of course, escalated the war by raised tariffs on about $75 million worth of American products to 20% or 25% on the exports on products like Swimsuits and wine, etc. This is clearly going to affect both the nations involved as well as the world in ways that cannot be pointed out precisely but can give us a 10,000 ft high picture of what is the outcome of the ongoing Trade war.

Speaking of how it might affect from an Individual point of view, the awareness about the fact will mess with the individual’s psychology making him/her to buy just goods that are necessary and putting off items that are luxury, like probably a vacation or an expensive watch and this is likely t create a ripple effect to slow down the economy on the whole. If this is a probability then there is solid proof of the US being on the brink of a recession, with the Gross Domestic Product fell 2 % from the first quarter of FY19. Especially the manufacturing sector has fallen to 49.1 from 59.2 and this is the first time this has been happening from 2016, due to the ongoing Trade War. The US manufacturers have been moving out of the US to combat the downfall of the economy. Despite all these proofs that the economy is having a downward spiral, the president of the United States seems to be in denial of this fact says that the US economy is in fact soaring.

The demands of the US trying to convince China to make fair Trade deals in the interest of saving Intellectual property rights and having fair tariffs but those amends have not bore fruits so far.

Effect on India

How is this trade war going to affect India, it is clear that India is second in the line of the leading populated countries in world and with the raking high Tariffs imposed by the US and no scope of exports taking place there, India does have an open market where all the goods can be sold leading to the increased imports from China to India. This may, in turn, result in a higher trade deficit for India. Apart from that since the exports market in the US is opening up owing to the high tariffs from the United Nation’s largest exporter, seems like India can easily try to bridge the gap. Taking in account the current scenario where the Indian manufacturing industries have been given impetus and limelight, seems like there is no time better than this to extent our manufacturing to the US.

Although for this opportunity to materialize, it may take time since India and China have different manufactured products. But the silver lining can actually turn into a boon if the trade war situation continues and the manufacturing industries relocate to different countries including India.

All these are subject to the government regulations of course, we will have to wait and watch to find out if this long-standing Trade war between the US and China is a boon or a curse for India based on our potential, government policies and norms.

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