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  1. Why Modi should avoid a showdown with Trump in global trade war

Why Modi should avoid a showdown with Trump in global trade war

The global trade war is out in the open and the man who is waging this war is United States President Donald Trump. But despite India being a collateral damage in this war, Narendra Modi should not flex muscles. Here's what experts have to say

By: | Published: March 21, 2018 1:25 PM
India cannot retaliate in trade war Modi India cannot flex too much of muscle in the trade war. (Image: AP)

The global trade war is out in the open and the man who is waging this war is United States President Donald Trump. Elected in 2016, with the motto of ‘Buy American, Hire American’, Donald Trump since has been on a protectionist spree — from hiking tariff rates on solar panels, steel and aluminium to threatening India and China with reciprocal tax and dragging India to WTO for exports subsidies.

And while Prime Minister Narendra Modi at global platform World Economic Forum criticised protectionism, analysts are saying that India cannot flex too much of muscle in the trade war. Industry body Assocham said that a higher level of imports than exports in India would not provide the country with a chance to retaliate.

Assocham said that India’s import bill in the current fiscal year could be of USD 450 billion against exports of about USD 300 billion. Of this, almost one-fourth of this would be only on account of crude and other related items. There are other essential imports of plastics and fertiliser also for which the country does not have an immediate domestic capacity.

Even as there 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, Assocham said. “We cannot flex too much of our importing muscle, even if our exports face consequences of the trade war and are subjected to tariff barriers,” it added.

The US recently dragged India to the World Trade Organisation (WTO), challenging Indian export subsidies at the WTO and contended that it is hurting US companies. India has responded to the US by saying that it has an eight-year window to phase out the subsidies that were supposed to boost country’s exports.

Exports body Federation of Indian Export Organisations (FIEO) President Ajay Sahai told FE Online that there was no dispute in US’ claims but since India has trade ties with the US, the government should carefully engage in dialogue with the US and try to convince them about our standing on the subsidies.

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