Yesterday, Trump signed a bill that finally fulfilled on his election promise to reduce America’s gigantic $375 billion trade deficit with China. In essence, the new taxes on metal imports from China will affect $60 billion worth of imports.
Unsurprisingly, the Chinese government retaliated with taxes, but only on about $3 billion worth of goods. Despite diplomatic noises coming from Beijing, stock exchange valuations across the world – including in India – fell in the face of this looming trade war. However, does India actually have anything to worry about?
US Trade Representative Robert Lighthizer mentioned the American dependence on Indian spice exports during the congressional hearing on the new tariffs. However, while US remains India’s largest market for spices, India does not represent enough of a threat to the overall American market.
Additionally, despite India’s trade surplus of around $29 billion with America, this number is not even in America’s top ten bilateral trade deficits. Moreover, this trade imbalance is predicted to decrease by $2-3 billion in the next year.
Essentially, India may be in a position where it could try retaliating to any potential tariffs but the retaliation will probably not have a substantial effect. As Lighthizer noted, “India may be in a position where they want to retaliate…[however] they have a system that has a number of vulnerabilities.”
Yet, he did mention that it is a relationship that America is monitoring closely and would like to maintain a certain amount of amicability. He ended his remarks by saying, “It’s a serious problem and one that we have considered.”
Header Image courtesy ‘Ip Man’ (2008), Mandarin Films.