this is about the US-CHINA trade policy and its impact on indian economy

1. THE TRADE POLICY BETWEEN US AND
CHINA AND ITS IMPACT ON INDIA
GUIDED BY : PROF. NITIN CHATURVEDI
SUBMITTED BY :
RASHIKA TRIVEDI ,BBAH1MG16016
VAISHNAVI RANA,BBAH1MG16020

2. INTRODUCTION

3. Despite growing commercial ties, the bilateral economic relationship
has become increasinglycomplex and often fraught with tension. From
the U.S. perspective, many trade tensions stemfrom China’s incomplete
transition to a free market economy. While China has significantly
liberalized it’s economic and trade regimes over the past three decades,
it continues to maintain(or has recently imposed) a number of state-
directed policies that appear to distort trade andinvestment flows.

4. TRADE HISTORY BETWEENUS ANDCHINA
U.S.-China trade rose rapidly after the two nations reestablished diplomatic
relations in January 1979, signed a bilateral trade agreement in July 1979,
and provided mutual most-favored-nation (MFN) treatment, beginning in
1980.6 In that year (which was shortly after China’s economic reforms
began), total U.S.-China trade (exports plus imports) was approximately $4
billion. China ranked as the United States’ 24th-largest trading partner,
16th-largest export market, and 36th-largest source of imports. In 2017, total
U.S. merchandise trade with China was $636 billion, making China the
United States’ largest trading partner

6. SINO- AMERICAL RELATIONS TODAY
Today, the United States and the People’s Republic of China are like the
European great powers of a century ago. They trade with each other, but
do not trust each other. They have the largest economies in the world,
and they have a financial and trading relationship that shapes the
global economy. But at the same time, they have different, and often
opposing, views on many national security and foreign policy issues.

7. The tensions between them are not the result of an enduring U.S.
resentment of China, or a tradition of hostility between them. They exist
because of the kind of government China has, and the actions it takes.
The U.S. relationship with China is long, rich, and complex. In the past,
both our traditions of freedom and our interests led us to support and
cooperate with China.

8. US PROTECTIONIST POLICIES

9. The Trump administration’s announcement that it will move to impose new
tariffs on about $60 billion in Chinese imports is shocking, but not
unexpected. The administration has been signaling for months that it was
readying far more aggressive trade actions, especially against China. It has
made it abundantly clear in both words and actions that the United States
will no longer be handcuffed by the rules of the World Trade Organization,
which forbid such unilateral sanctions. And, while allies will rightly complain
about the United States’ blatant disregard for the rules, the complaints
levied against China’s trading practices are significant and broadly shared.

10. 1. Withdrawal from NAFTA
The first scenario considers the expected economic consequences of a
reintroduction of US trade barriers with NAFTA countries. In doing so,
possible tariff adjustments and non-tariff barriers between the NAFTA
countries are taken into account. The revocation of the North American
Free Trade Agreement would damage its member countries – the US,
Canada, and Mexico – the most

11. 2.Introduction of a border tax adjustment
The introduction of a border tax adjustment would cause US gross
household income to contract by 0.67%. Other countries, such as
Germany (-0.86%), the Netherlands (-0.74%) and South Korea (-0.
3%), would suffer even greater losses from a border tax than the US
itself.

12. 3. Protectionist US trade policy with respect to the
rest of the world
Accounting for such a restrictive trade policy, in a second scenario, US tariffs
are assumed to increase by 20% against all WTO member countries;
retaliation of US trading partners causes tariffs against the US to be
increased by 20%; and the US raises its non-tariff barriers by 20%.
Furthermore, WTO countries equivalently introduce non-tariff barriers as
retaliation measures against the US. Evidently, retaliative trade policy
measures by WTO members against the US would not improve the situation
in any country.

13. WHO ACTUALLY BROKE THE BRIDGE ??
The US then went on to levy a 25 per cent tariff on more than 1,300 Chinese goods.
And China responded on Wednesday by levying additional duty on 106 American
products.

14. ARE WE READY ?
 China’s us trade surplus in 2016 was $350 billion.
After adjusting 30% value addition from third country imports , it is
still about $280 -$ 300 billion.
India’s us trade surplus was $25 billion in 2016
India’s surplus after adjusting the value addition from third country
imports is $130 billion .
Both US and CHINA cannot afford to do without US now.

15. How india will gain from trade war?
Economists like to say that no one wins in a trade war. We may soon find out
if they're right. Only hours after U.S. President Donald Trump said he would
slap tariffs on a range of Chinese products, China imposed punitive duties
on some imports from the U.S. in retaliation for previously announced U.S.
tariffs on steel and aluminium. And here we go, down the rabbit hole.
Companies, workers and consumers from both countries are almost certain
to get hurt in a tit-for-tat conflict. On the other hand, the carnage could
produce big winners elsewhere in the developing world.

16. A wider US-China trade war could
accelerate the transition. US
companies that rely heavily on
imports from China, such as
electronics brands and retailers,
would be forced to redesign their
supply chains around tariffs.
Multinationals and their suppliers
would look for alternative facilities
outside China; some would
probably decamp from the
mainland altogether for cheaper
climes.

17. BIGGER WORRIES FOR INDIA
• INTERESTRATES
A greater worry for India could be the indirect
impact — the potential cascading
inflationary impact of the decision in the
US itself. Within the US domestic
economy, higher tariffs on a range of
imported products escalate the threat of
higher consumer prices, caused by
importers passing on their increased costs
of raw material.
• OUTFLOWOF MONEY
Rising interest rates in the US could
mean a potentially rough ride for the
India’s equity market. Higher US
rates will lead to outflows from
emerging market bonds and equities
as American investors will look to
chase higher returns in their home.

18. CONCLUSION
Of course, the effects of trade wars on this scale are bound to be
felt across the globe. Should NAFTA negotiations also prove to be
fraught, Mexican producers and consumers would feel
considerable pain.

19. Asian supply chains are also likely to be
disrupted. Mr Capri explains: “There is a wide
network of value chains that feed components,
sub-components and materials into the Chinese
manufacturing and assembly base. Retaliatory
tariff increases on those will have a ripple effect
going all the way back to suppliers throughout
Asia.” Chinese and other Asian producers are also
embedded in the supply chains of many US
companies. With such levels of integration, there
are few players in either Asia or North America
that would remain unaffected.