The impact of Trade War on India

It started as a series of threats and allegations against China and has become a reality since March 2018. One of the primary consumers of a number of goods from China, United States has also accused China of theft of intellectual information. In order to reduce the trade imbalance, Trump has announced imposition of 25 percent and 10 percent dry on steel and aluminum from all countries except Canada and Mexico.

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However, a trade was does not only affect the two economies involved but affects all the economies open to the world trade. India is also getting dragged into this. Indian rupee hit a one month low this week as it dipped by 39 paise to Rs. 68.38 against dollar as Trump threaten to impose another round of tariffs on goods worth $200 billion. This has a negative impact on the trade deficit as India will have to pay more for imports.

The key indices also fell amid global trade war concerns as the investors remained cautious. The Sensex plunged more than 262 points touching the lowest in two weeks. Asian markets also traded in red. As a counter measure against the duties on steel and aluminum, India imposed duties on 30 goods imported from the US. A total of $241 million worth of duty will be paid by India against the imposition on steel and aluminum. And to neutralize this effect, US shall pay about $238 million as duties on goods exported to India and it will come into effect from 21st June.

The trade war is no good news for the consumer as everything under the tariff scanner becomes expensive. For the Indian food sector, walnuts and almonds are expensive and the prices of pulses and lentils are expected to go up. The list of thirty goods includes artemia which is an enabler in the production of shrimps. Even fresh apples have made it to the list with a 25 percent duty. The additional duty could affect the cost of production for the manufacturing industry as it increases the cost of raw material. These include parts of structures for iron and steel, stainless steel fittings, screws and bolts, binders for factory moulds and a range of springs, plates, sheets and cast articles of iron and steel. A duty as high as 50 percent has been proposed on motorcycles with an engine capacity of more than 800 cc which includes Harley Davidson.