Trade war: China hits back with retaliatory taxes on US imports, markets dive

Beijing imposes 15% tariff on 120 goods worth almost $1 billion, including fresh fruit, nuts and wine; 25% on eight goods worth nearly $2 billion, including pork and aluminium scrap; commerce ministry in India plans internal meet, weighs options.

Markets across the world took a beating late Thursday and Friday after US President Donald Trump followed through his earlier metal import tariffs with an executive memorandum directing the US trade representative to level tariffs on around $60 billion worth of Chinese imports.

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“This has been long in the coming” Trump said, going on to accuse China of stealing six million US jobs and perpetrating massive intellectual property theft worth “hundreds of billions of dollars”. The US Trade Representative Robert Lighthizer also dragged China to the World Trade Organisation (WTO) on Friday alleging Chinese denial of basic patent rights to foreign firms and imposing mandatory adverse contract terms.

China on Friday said it was “ready to fight a trade war” and unleashed its own proposal to levy retaliatory taxes on imports of 128 US products worth $3 billion.The back and forth between the two global economic superpowers saw stock markets take a pounding, especially in the US and Asia. India’s Sensex and Nifty mirrored the global trend. However, market volatility was minimal in the hope that the implications on India aren’t as destructive as it appears, at least for now.

But, for India, macro risks are rising “even though the economy has some buffers,” pointed out Radhika Rao, India Economist, DBS Bank, adding that in the immediate term “sentiments and the rupee remain susceptible to US monetary policy trajectory and trade war concerns”.

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If the situation escalates into a free-for-all trade war “our exports are bound to be buffeted. The expected double digit growth in exports in FY19 may not happen,” CARE Ratings said.

The commerce ministry is planning an internal meeting with  senior economists and foreign policy experts ahead of the visit of the Chinese trade minister. “Commerce ministry is weighing options on taking a stance as they are the two most important markets for India,” an official with DGFT told The New Indian Express.