US-China Trade War

The brewing US-China trade war has now burst into the open. President Donald Trump has announced that to remedy a “multi-billion dollar trade deficit with China” he is taking a series of steps. US tariffs will be raised on about $50 to $60 billion worth of Chinese goods for ‘levelling’ tariffs between the two countries. Also, new restrictions will be imposed on Chinese investments in US. Then the US will also ‘take action’ against the Chinese at the World Trade Organization (WTO). China is unhappy with the US decision. Though Chinese spokespersons said that China was not afraid of a trade war with the US and would “fight such a war to the end”, Chinese Prime Minister Li Keqiang said: “A trade war does no good to anyone. There is no winner.”
A trade war between two countries which have the two biggest economies in the world will affect other countries as well, besides affecting the global economy. If both the countries wage a no-holds-barred trade war against each other, nobody knows what the consequences will be. The world economy today has been integrated and no country can afford to withdraw into a cocoon. All countries are interdependent in matters of trade and commerce. India-China bilateral trade is also very unequal and heavily tilted in favour of the Chinese. The trade deficit for India jumped from $48.48 billion in 2014-15 to $52.68 billion in 2015-16.  India is trying to reduce the deficit but a boycott of or heavy reduction in import of Chinese goods is out of the question. Corrective steps have to be taken in mutual consultation and not unilaterally.
Bilateral trade between a small country with a weak industrial base and a big country with a far stronger industrial base and a far bigger-sized economy is normally tilted in favour of the bigger and stronger one. Indo-Bangla bilateral trade is an example. Indian exports to Bangladesh far outstrip Bangladesh’s exports to India. Both countries are trying to reduce the gap. The same is true for India-China trade. Indian markets have been flooded with Chinese consumer durables – some entering legally, some clandestinely. But any unilateral step by India is out of the question. A US-China trade war will impact almost every country. Japan and Australia, for example, have already shown their concern at the possible impact of the trade war on their respective economies.

Saturday, 31 March, 2018