Implications of trade war on developing countries :

 

(i) Diminished US-China trade engagement could have positive results for countries such as Brazil and India from a trade perspective, at least in the short run.

 

For instance in the case of soybean there could be a cascading impact in terms of openings for India to enter other markets

 

(ii) In the long term, a full-fledged trade war is not good for India. It invariably leads to a higher inflationary and low growth scenario.

 

(iii) Increase in interest rates in the US has implications for emerging economies such as India, both for the equity and debt markets.

 

(iv) The three external risk factors higher tariffs, rising interest rates, and elevated bond sales will come at a time when the domestic banking system is grappling with a renewed stress of bad loans.

 

(v) US-China trade war could accelerate the transition. US companies that rely heavily on imports from China would be forced to redesign their supply chains around tariffs.

 

Multinationals and their suppliers would look for alternative facilities outside China. This is bad news for China but might benefit India.

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