India’s Economic Resilience Amid U.S.-China Trade Tensions
Vinod Nair from Geojit Financial Services explains that India is insulated from U.S. market downturns due to low goods trade levels and is working towards a Free Trade Agreement with the U.S. Meanwhile, rising tariffs create instability in the U.S. economy, and a prolonged downturn could affect global markets. Despite challenges, India’s focus on enhancing trade is expected to foster future growth.
Vinod Nair, Head of Research at Geojit Financial Services, has stated that India seems to be insulated from potential downturns in the U.S. markets amidst rising trade tensions. In light of increased tariffs imposed by the U.S. on Chinese goods, which could reach an average of 39%, China retaliated with tariffs on U.S. food products. As a result, manufacturers in China are adopting tariff engineering strategies, relocating assembly operations to Southeast Asian countries and North American nations to mitigate the impacts.
President Trump’s tariffs on Chinese imports have been firmly enforced; however, implementation regarding tariffs on Mexico and Canada remains uncertain. Initially, tariffs scheduled for February were postponed to March, and by March 6, many were suspended with selective duties imposed. Canada countermeasured by threatening a 25% surcharge on electricity exports to the U.S., leading to retaliatory threats from Trump. To avoid negative repercussions, India is pursuing a Free Trade Agreement with the U.S. to bolster bilateral trade relations.
The ramifications of aggressive U.S. trade policies have contributed to economic instability within the stock market and heightened inflation, with the economy grappling with stagflation. In contrast to the U.S. Federal Reserve, which has maintained a rate of 4.5%, the European Central Bank has implemented six rate cuts. Economic indicators within the U.S. signal a slowdown, with rises in unemployment and consumer sentiment, reflecting broader uncertainty.
The weakness of the U.S. dollar is demonstrated as the DXY has corrected significantly, while stock markets in Europe and China have shown positive movement, aided by supportive governmental measures and increased liquidity. Notably, the U.S. stock market has seen a downturn, with S&P and Nasdaq correcting by 10% and 14%, respectively, from their recent highs. Investor sentiment remains volatile, as concerns over potential recession due to trade wars loom.
Global investors express apprehension regarding the impact of a prolonged downturn in the U.S. on worldwide markets. Nevertheless, India is positioned to benefit from increased goods exports despite currently low trade levels with the U.S. The Indian government is diligently working towards finalizing an FTA to support this prospective growth.
In summary, rising trade tensions between the U.S. and China have led to increasing tariffs and economic instability. While the U.S. faces potential recession risks and market corrections, India is notably insulated from these challenges. The pursuit of a Free Trade Agreement with the U.S. reflects India’s strategy to bolster its economic position while capitalizing on anticipated growth in export markets. Therefore, India is poised for potential economic expansion amid global uncertainties.
Original Source: www.livemint.com
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