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Indo-US trade relations facing troubled times

"Though India is still growing steadily amid the unexpected US trade proposition, industry might get bruises if the situation doesn’t turn up in India’s favour, fear analysts. President Trump’s recent amendments in trade policy are impacting global economic growth negatively. As counteractive measure, other countries have started imposing retaliatory tariffs, followed by counterthreats by the US, which has greatly raised concerns over tit-for-tat protectionist measures. Expert say, an all-out trade war will prove detrimental to global markets. Global economic growth hinges on the free movement of goods. If countries revert to large-scale nationalism, it could set growth back by a couple of decades. If this plays out, markets will feel the heat."

 

Indo US trade relations facing troubled times

 

Though India is still growing steadily amid the unexpected US trade proposition, industry might get bruises if the situation doesn’t turn up in India’s favour, fear analysts. President Trump’s recent amendments in trade policy are impacting global economic growth negatively. As counteractive measure, other countries have started imposing retaliatory tariffs, followed by counterthreats by the US, which has greatly raised concerns over tit-for-tat protectionist measures. Expert say, an all-out trade war will prove detrimental to global markets. Global economic growth hinges on the free movement of goods. If countries revert to large-scale nationalism, it could set growth back by a couple of decades. If this plays out, markets will feel the heat.

Indo US trade relations facing

 

India is 9th in the list of US’ trading partners that have a trade surplus. Trade surplus means we export more to the US than we import from the country. India’s exports account for a substantial 15 per cent of US’ aggregate trade with the world. Gems & diamonds top the chart, followed by pharmaceuticals, textiles, fish and petroleum products. As of now, these exports are not on the radar of the US, but there is a risk of retaliatory tariffs on these goods as well. Trump’s restriction on steel and aluminium imports will not impact India much as just about 4 per cent of the steel exports flow into the US while aluminium exports constitute 2 per cent of total US aluminium imports. Given this situation, Abhishek Poddar, analyst, Kotak Securities, points out the US trade protection measures will lead to a temporary disruption in a few regional markets as new trade channels open up to cater to supplies left behind from reduced US exports. However, the potential steel mill and aluminium smelter restarts in the US will not significantly weaken the outlook on global aluminium and steel, especially given supply side reforms in China in these industries.

Moreover, President Trump has also implied higher import duty on US-made Harley Davidson motorbikes. He previously threatened to slap retaliatory taxes on motorcycles coming into the US from India. While the Indian government responded by slashing customs duty on imported high-end motorcycles to 75 per cent from the earlier 100 per cent, and eventually cut it down to 50 per cent, the US president made it clear that the cuts were not enough. If the US decides to levy equivalent duties, it could affect US-bound exports of two leading Indian two-wheeler manufacturers—Eicher Motors and Bajaj Auto. The former exports its Royal Enfield range of motorbikes, while Bajaj Auto ships the KTM brand to the US. However, the volumes are limited to a few thousand units, with the total value of Indian motorcycle exports to the US at just about $6 million in 2016-17. Tariffs are not likely to create a visible dent on these firms’ profitability, which enjoy a strong domestic demand.

 
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