Continuing Trade War

Why in news?

• India has recently hiked duty on 29 items imported from the US.
• The retaliatory measures by India and other countries to US's tariffs are indicative of an expanding trade war.

What is India's move?

• Earlier India told WTO of its plans to increase the customs duty on 30 products imported from the US.
• Motorcycles with internal combustion engine capacity over 800 cc was in the list.
• However, India has now left out such motorcycles.
• It has slapped tariffs as high as 50% on a list of 29 goods imported from the U.S.
• Some of them are lentils, boric acid, fresh apples and shelled almonds.

What is India's stance?

• India’s notification to the WTO says that U.S. tariffs on steel and aluminium would cost India $241 million.
• Thus, the tariffs imposed on the U.S. would bring in a commensurate amount.
• It has also indicated its preference to deal with the issue through dialogue.
• It has stated clearly that it did not prefer “measures and counter-measures”.

What are the other recent developments?

• In the recent period, China and the US have imposed various rounds of tariffs on each other.
• It all began when US unveiled tariffs to discourage the import of steel and aluminium into the country.
• The latest round of tariffs imposed by the U.S. on Chinese goods will be the highest in terms of the value of goods.
• It will now affect Chinese goods worth $450 billion.
• Notably, total Chinese imports into the U.S. last year were worth around $500 billion.
• The European Union also joined the trade war recently, imposing tariffs on $3.3 billion of American goods.

What will the implications be?

• Investors may be beginning to take threats of a trade war more seriously.
• The fact is that all sides engaged in a trade war eventually lose.
• The longer it goes on, the greater the cost.
• This is because growth slows down under the increasing burden of taxes.
• The only gainers in a trade war will be special interest groups, such as the U.S. steel industry.
• Even retaliatory tariffs may only perpetuate the vicious negative-sum game.
• It may not contribute to bringing the war to an end.
• Global powers must try their best to bring an end to the ongoing trade war before it gets out of hand.

Source: The Hindu, Indian Express