No room for retaliation in Trade War

India may be running an annual trade deficit of about US$150 billion, but a much higher level of imports than exports would not provide the country handle to retaliate, should the world witnesses an escalation in trade war, since most of the Indian imports are unavoidable, said ASSOCHAM.

“Though, we may end up the current fiscal with a hefty import bill of US$450 billion against exports of about US$300 billion, almost one-fourth of this would be only on account of crude and other related items,” said the trade body.

“Then, there are essential imports of plastics and fertiliser for which the country does not have an immediate domestic capacity,” it pointed out.

“However, even before the break out of the trade war, India has seen a huge jump of 21% annualised rise in steel imports at US$1.15 billion in February, 2018 and non-ferrous metals by 33% at US$1 billion.

“Yes, India should be watchful about a sudden jump in steel imports since we have enough domestic capacity available. Similar is the position with coal and related products for which domestic output can be and should be ramped up,” said ASSOCHAM.

US President Donald Trump has signed notification slapping import tariff of 25% on steel and 10% on aluminium. He has also said that more items could be brought under high import tariff, triggering fears of retaliation from Europe, Japan and China.

As far as India is concerned, even if “we want to retaliate we cannot do it without pain since, our imports are of essential nature”.

“We cannot flex too much of our importing muscle, even if our exports face consequences of trade war and are subjected to tariff barriers,” cautioned ASSOCHAM.

So, the best course would be to keep engaged with the major trading partners, without aligning ourselves too much into a single bloc.

“Wherever, our exports are affected, we must engage bilaterally and use the channel of the World Trade Organisation in a rule based manner.

“However, the World Trade Organization route could be time consuming. So, the best course would be to stay bilaterally engaged,” it pointed out. fii-news.com