While global stock market meltdown is being witnessed, former CEA Arvind Virmani says that it is due to the exaggerated effect of the trade war on real economies.
The global trade war is out in open with US President Donald Trump waging it and China strategically retaliating it without allowing it to escalate into a full-blown war. And while global stock market meltdown is being witnessed, former CEA Arvind Virmani says that it is due to the exaggerated effect of the trade war on real economies. He estimates that the trade war between the United States and China is going to benefit India in long-term and emphasises on capitalising on it while keeping a low profile.
In a detailed Facebook post, Arvind Virmani estimated that the initial loss due to the trade war in short-term will be four times more for China than the US, while the loss to the rest of the world would be one-fifth or one-tenth of US’ losses. “A trade war between US & China would reduce China’s growth rate to a sustainable 4.5% This will be in the long-term interest of world economy(& India),” Arvind Virmani says.
2) My analysis is about real economy not stock market. The uncertainty will affect US stock market & markets in which Affected firms are listed. My main point is that stock watchers & free trade Ideologues are exaggerating th effect on Real World economy (excluding China)
— Arvind Virmani (@dravirmani) April 6, 2018
Even if China resorts to unconventional means to hurt America, the noted economist says that “US interest rates would rise sharply, but revert over 1-2 years to normal (pre-sale) trend”. He further notes that there will not be any impact on India due to the trade war as the country is not a part of existing global “supply chains”.
“…Au contrary (on the contrary) it provides an opportunity to attract/facilitate their shift to India, particularly FDI exporters based in China,” Arvind Virmani added.
A report by DBS Group also estimated from early stock market reactions that it was China that was witnessing more losses than the US. “In the first four trading sessions of April, the DXY (USD) Index appreciated 0.5% while the Dow Jones Industrial Average rose 0.7%. On the other hand, the yuan depreciated 0.4% while the Shanghai Composite Index fell 1.2% in the first three days of this week. The above price actions were contrary to the consensus that the US would suffer more than China in any trade spat,” the Singapore-based bank said in a note.