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On Friday, the US’ decision to hike tariffs to 25 per cent on $200 billion worth of Chinese goods took effect, a move that could impact goods trade in more than 5,700 product categories and spark off another round of tariff wars between the two largest economies of the world.
Reuters report that Beijing has said it would strike back, ratcheting up tensions as the two sides pursue last-ditch talks to try salvaging a deal to avert the crisis.
Trade Impact
The biggest Chinese import sector impacted by the hike in tariffs is the $20 billion-plus category of internet modems, routers and other data transmission devices, alongside printed circuit boards used in a number of US-made products. Furniture, lighting products, auto parts, vacuum cleaners and building materials are also faced with higher levies. The tariffs could hamper the rebound in the US economy, with consumption likely to take a hit as these tariffs would be paid by American consumers and businesses.
India impact
There could be a short-term impact on the stock markets. The benchmark Sensex at the Bombay Stock Exchange has been falling in line with the global markets that have been falling over fears of the escalating trade war between the US and China.
While the concerns last week hovered around the US decision to withdraw waivers on imports from Iran that led to a rise in crude oil prices and fall in equity markets, the growing concern over the escalation of US-China trade war has spooked the market worldwide in the last week.
In the longer run, while a slowdown in the US economy does not augur well for emerging markets, the trade war heralds a silver lining for some countries. India is among a handful of countries that stand to benefit from the trade tensions between the world’s top two economies, the UN has said in a report.
Of the $200 billion in Chinese exports that are subject to US tariffs, only about six per cent will be picked up by firms in the US, according to a report released February by the UN Conference on Trade and Development (UNCTAD).
Countries that are expected to benefit the most from the trade war are the EU members as exports in the bloc are likely to grow by $70 billion. Japan and Canada will see exports increase by more than $20 billion each, it said. Other countries set to benefit from the trade tensions include Australia, with 4.6 per cent export gains, Brazil (3.8) India (3.5), Philippines (3.2) and Vietnam (5), the study said.
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