Foreign Policy (4)

India is Trump's Next Target in the Trade War

Ending India’s preferential trade treatment won’t hurt economically—but it is politically dangerous. Read full article Abstract: Just as tensions with China have started to ease, U.S. President Donald Trump has opened a new front in his trade war: India. On March 4, 2019, he fired the first shot by notifying Congress of his intention to end the favorable treatment India has enjoyed under the Generalized System of Preferences (GSP). Negotiated during the 1970s under the auspices of the General Agreement on Tariffs and Trade, and later subsumed into the World Trade Organization, GSP allows many products from India and other developing countries to enter the United States duty-free. Trump’s decision to end GSP did not come as a surprise. Despite close cooperation between the world’s two largest democracies in defense and other areas, trade relations between them have been prickly for some time. They acquired an extra edge under Trump, who has sarcastically described India as “the tariff king.” Trump’s favorite complaint is India’s high tariff on Harley Davidson. But that isn’t the only one. He’s also irked that the United States…

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The Trade War has claimed its first victim

Tariffs from the United States, Canada, China, Mexico, and the EU may have damaged the WTO beyond repair. Read full article Abstract: The World Trade Organization (WTO) might be the first victim of the trade war between China, the United States, and the European Union. Today, each is in flagrant violation of its rules, and the institution’s credibility as the protector of a rules-based trading system is in serious doubt. U.S. President Donald Trump initiated the trade war in March when he announced the imposition of a 25 percent tariff on steel imports and 10 percent tariff on aluminum imports from most countries. In May, he expanded the duty to include imports from Canada, Mexico, and the EU. In a move that surprised few, China reacted by imposing tariffs of its own on an equivalent volume of steel and aluminum imports from the United States. Canada, Mexico, and the EU eventually joined China in retaliating, too.

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India's Financial Secret Weapon

A cheaper currency will help rebalance India’s massive trade deficit. Read full article Abstract: Since January, the Indian rupee has tumbled more than 9 percent, hitting a new all-time low of about 70 to the dollar in mid-August. The fall has caused much hand-wringing in the media and in policy circles, where observers lament the currency’s status as Asia’s worst performing, charge Prime Minister Narendra Modi with economic mismanagement, and fret about India’s ability to pay its debts. Calls for the government to do something—anything—to stop the rupee’s slide abound. But should India’s central bank, which has responsibility for managing the exchange rate, reverse the fall? My short answer is: no. The central bank has done an excellent job to date, and it should stay its course. Further, the weakening of the rupee will actually be a good thing for India.

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