US Tariffs Spark Fears Of Chinese Dumping Globally, Hurting Indian Exports, Ex-IMF Economist Warns
If China uses forex as a 'tool' to counter tariffs, then that can also adversely impact competitors like India, Bangladesh and Sri Lanka, former IMF economist Prachi Mishra said.
The imposition of tariffs on Chinese goods by the United States can compel China to dump its products in the rest of the world, thereby hitting the competitiveness of Indian exports, according to Prachi Mishra, former economist at the International Monetary Fund.
Days after the start of Donald Trump's presidency, the US on Feb. 1 announced tariffs on imports from neighbouring Canada and Mexico and economic arch-rival China.
On Chinese imports, a 10% tariff has been imposed by the Trump regime, whereas the imports from Mexico and Canada will attract 25%. The tariffs were to come into effect from 12:01 a.m. (EST) on Tuesday.
"As the US pushes Chinese goods back, China is going to dump it on the rest of the world... We are already seeing some of it, and this can reduce India's competitiveness," said Mishra, who is also the director and head of the Isaac Centre for Public Policy, Ashoka University, while speaking to NDTV Profit.
If China uses forex as a "tool" to counter tariffs, then that can also adversely impact competitors like India, Bangladesh and Sri Lanka, she explained. In December, news agency Reuters had reported that policymakers in Beijing were considering weakening the yuan to make the exports cheaper.
'Silver Lining'
The tariffs could have a "silver lining," Mishra said, adding that excess supply of Chinese goods outside the US market can reduce global prices and lower inflation, including in countries like India.
Also, there can be "opportunity for India" to capture some of the space that would be vacated by countries that would be hit by Trump's tariffs, she pointed out.
According to Mishra, although the US has imposed tariffs on China, Mexico, and Canada, the action seems to be softer than what was initially promised. This, she said, could be aimed at preventing a sharp uptick in domestic inflation.
"First of all, energy trumps everything," the economist said, pointing towards the fact that the US has imposed a tariff of only 10% on energy imports from Canada, even as the rate is higher at 25% for other goods.
"There is fear of inflation," she stressed. The baseline expectation of tariffs on Chinese imports was 20%, and on some items it was 60%, Mishra said, adding that tariffs at those rates on Chinese consumer goods "would have boosted inflation" in the US.
Notably, Canada and Mexico have hit back at the US with counter tariffs. China has not announced retaliatory duties but has vowed to take the case to the World Trade Organization.
