Business Today 22nd April 2018 | Page 4

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Waging a Trade War

T

HE US President Donald Trump has threatened to wage a trade war against countries he perceives to have an unfair trade advantage to correct the trade deficit of his country . He wants to throw up protectionist barriers so that manufacturing returns to the US , and more Americans get jobs that are currently being outsourced . So far , he has imposed steep tariffs against imports of steel and aluminium , and slapped additional tariffs on 1,300 goods imported from China . He has complained about India ’ s trade policies and made it more difficult to get a H1B ( temporary work ) visa , which was used heavily by the Indian IT services companies . He has also threatened to wage trade wars against the European Union ( EU ), and other countries .

In turn , China has retaliated by imposing its own set of tariffs against goods imported from the US . The EU has warned of retaliatory action if Trump takes any further steps . Countries around the world are bracing for a full-blown global trade war .

How will it affect India ? On the surface , India ’ s share of global trade – at less than 2 per cent – is too low to worry . But in terms of India ’ s GDP , foreign trade – import and export – actually accounts for over 40 per cent . So , if a trade war breaks out , it will inevitably affect India and its economic growth . India cannot expect to accelerate its GDP growth to 8 per cent plus , unless its exports start growing faster . In fact , every Asian country that has grown its economy rapidly has depended heavily on exports to do so , and there is no reason why India will not follow the same trajectory .

A global trade war , though , might not be all bad news for India . On the one hand , while a trade war can make things tougher for Indian exporters and also make the country vulnerable to dumping of goods from other countries , it can also lead to opportunities . For example , there are many countries – including the EU and China – in which India can hope to increase exports if the US becomes a tougher market . More importantly , a number of countries are re-examining the possibility of bilateral treaties with India ( and others ) as a means to minimise the effects of an impending trade war .

Global trade has become too important for even an economy as big and powerful as the US to try and slow down . If the US tries to put up barriers , it will find that its people will suffer the most because all goods and services in the country will become more expensive .

But while global trade and the integration of the global economy is a clock that cannot be turned back even by the US , it would be good to remember why protectionism is becoming popular with leaders across the world . A lack of enough job opportunities for people joining the workforce , and rising inequality of income have been the sideeffects of the global journey . And that has led to a growing resentment in common people across the world , and in different countries , and leaders need to find a solution to that . prosenjit . datta @ intoday . com @ ProsaicView

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Vol . 27 , No . 8 , for the fortnight April 9-22 , 2018 . Released on April 9 , 2018 .

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