In an escalating trade war triggered by the US President elect Donald Trump with Mexico and China, India may find itself in the cross fire with collateral damage to its economy, particularly to sectors such as information technology and select goods exports to the American market, an ASSOCHAM Paper has said.
“Though China and Mexico are in direct firing line of Donald Trump, India needs to watch out and must build bridges with the upcoming American administration and assuage the concerns about the American jobs,” the chamber said on a status paper on the regime change in the US.
Those who thought the Trump threat to the American companies against job outsourcing to China and Mexico , particularly in the manufacturing, was only an election rhetoric are in a for a rude shock. “The Trump threat to protect the US interest in an inward looking manner is for real now. The manner in which Ford has announced scrapping of its USD 1.68 billion plan to set up a manufacturing plant in Mexico shows that Trump means business when it comes to carrying out the threat of heavy border tax on the US firms which, as he calls it, ship the jobs abroad,” the paper said.
ASSOCHAM said, “India should not sit and watch the trade war among the big economies, mainly the US and China from the sidelines. We must take pro-active steps to ensure that we remain on the right side of the upcoming US administration; or else the impact could be on the Indian services exports to the American firms.”
According to the paper, the collateral damage for India would not only come from the US but also from China. “With its economy being aggressively export driven, particularly in manufacturing, China would look for alternative export destinations outside the US in Europe and Asia. In the coming months, after inauguration of Trump to the White House, China would double up dumping of its goods to countries like India as it gets entangled with the US over trade barriers,” it said.
The dumping from China has been quite severe in the recent few years in areas like steel aggravating the problems of the Indian industries.
Under the given circumstances, the Indian government along with trade bodies like apex business chambers, influential think tanks, opinion leaders and a large diaspora must work for an effective lobbying to explain to the US policy makers as to how free trade, more so, in services would help both the US and the Indian companies.
“If the US gives jobs to Indians in back-end operations, India gives a huge market to the giants like Google, Microsoft and Intel who are all now looking at the digital expansion in the Indian economy. So, it is a win-win situation for both the countries,” the ASSOCHAM Secretary General said. India imports as significantly as it exports to the US in goods and services.