Donald Trump’s general rates have put the world on the verge of a possible world war in trade. The European Union has sworn a united response and China has threatened countermeasures.
Notation agencies like Fitch have warned that mass rate increases could cause lower growth, higher inflation and potentially a recession in certain parts of the world.
How will India – The third economy of Asia – will it sail for these global tremors?
Trump brought the most brutal blow to Asian countries, slapping 34% of tariffs on China in addition to the 20% previously taken. Vietnam and Cambodia will have to pay 46% and 49% respectively.
In relative terms, at 27%, India has resisted better.
But the rate is still high and will seriously affect “exports with a high intensity of workforce”, explains Priyanka Kishore of the Council in Asia DecoDée. “This will probably have an impact on domestic demand and the gross domestic product at a time when the stingy growth already,” said Ms. Kishore.
But the new commercial realities also set up opportunities for India.
Its new price differential with Asian peers can potentially lead to an export re -evolution. “We can bring together shoes and clothes of Asian peers if we bring together our act,” explains Nilesh Shah, manager of veterans.
It will take time, however.
The government of Prime Minister Narendra Modi must therefore be strategic in the way he sails in the situation.
Above all, the announcement should “give the government a greater emergency feeling to conclude a trade agreement with the United States,” said Rahul Ahluwalia, an expert in public policy who previously worked for a government department. “The United States is our largest export market, so it’s serious things.”
India exports some $ 91 billion (69 billion pounds sterling) to goods in the United States, which represent 18% of its global exports. Eventual commercial negotiations have been underway with a deadline for falling for conclusion. Ahluwalia says that the deadline could now be compressed and advanced.
In doing so, India must also extend the export markets beyond the United States and focus on regions where prices remain low, such as Europe, Southeast Asia and Africa, recommends the Indian Trade Research Agency Gtri.
In the past two years, India has shown renewed appetite for commercial transactions, the launch of the free trade agreement (ALE) for interviews with a range of countries and blocks, including the European Union and the United Kingdom.
Last year, Delhi signed a free trade agreement of $ 100 billion with the European Free Trade Association (EFTA)-a group of four European countries which are not members of the European Union.
Experts say that discussions with other partners could now be accelerated as cracks deepened between the United States and many other global economies on Trump’s actions.
But even if commercial negotiations continue with the global partners, the government will need a plan on how it deals with national repercussions of Trump’s decision.
The impact on sectors that employs millions of people – such as precious stones and jewelry and textiles – is likely to be significant. The government will have to extend support by means such as expansion of production subsidies to ensure that India national industry remains competitive on a global scale and can take advantage of the new opportunities that this has accelerated, according to the Council, Ernst & Young
The prices are “fundamentally raised the global trade system”, explains Agneshwar Sen, an expert in commercial policy at Ernst & Young India. This will require a “fundamental revaluation of trading strategies” as new emerging supply chains, he adds.
India will also have to be aware of the other risk factors that emerge from this – as “Chinese dumping”, explains Mr. Shah.
As it becomes more difficult for Chinese products to enter the United States, they will have to find other markets. And there are few others that are as tall as India.
“The Global South represents more than 20% of global consumption and this is where the new middle class is created. This is where China will try to sell,” said Akash Prakash from Amansa Capital, an investment management company in Singapore.
For the moment, there is little clarity and no official word of the government on its plans.
India has already reduced prices on certain goods, including high -end motorcycles and Bourbon whiskey. Unlike Canada, Mexico or the European Union, Modi’s government has adopted a Trump’s conciliation approach and these announcements do not trigger reprisals, the experts say.
Indian companies will now most likely be confronted with a period of uncertainty that will probably not disappear anytime soon.
“Obviously, the Administration (Trump) wants even wider and deeper price cuts. The question is what, if necessary, will satisfy the Trump administration?”, A main member of Endowment at the BBC said.
This is a question to a million dollars, for which there are no immediate answers.
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