Growing US trade tensions, caused by the raised tariffs on foreign products, could lead to the isolation of the United States by the world’s emerging economies, according to an Indian economist.
India and China, supported by Russia, can unite under the pressure of US tariffs, according to Dr. NR Bhanumurthy, a professor at the National Institute of Public Finance and Policy, based in New Delhi.
“You can also read something in Prime Minister Modi’s recent informal calls to China and Russia,” the economist said.
“Recent developments during the G-7 meeting in Canada also suggest that the US seems to be getting isolated and in that case the trilateral situation between Russia, India and China could be a win-win situation not only for these three countries, but also other BRICS countries that are struggling with tariff increases in the US,” he added.
Earlier this year, US President Donald Trump imposed a 25% import duty on steel and 10% on aluminum from several countries, including Russia, China and India. All three have opened disputes at the World Trade Organization (WTO) over the protectionist movement. In addition, Russia and India have approved mirror rates that should cover their losses due to US rates.
Earlier this month, more than a thousand categories of Chinese products were affected by 25% in export tariffs. Beijing retaliated immediately with a 25% tariff on 545 US products worth $50 billion. The move triggered another wave of threats made by Trump.
Bhanumurthy urged the parties to revive regional trade agreements that have been neglected for some time. In addition to the BRICS, India is a member of the South Asian Association for Regional Cooperation (SAARC), which includes Afghanistan, Bangladesh, Bhutan, Nepal, Maldives, Pakistan and Sri Lanka.
“As we have seen in the past, globalization has led to gains for all countries – we may have to face exactly the opposite of that,” the professor said. “It is not surprising that the current US president is clearly looking for large-scale protectionism, especially during the upcoming elections.”
The economist also said that additional protectionist measures against India could have an adverse impact on its growth as the country’s corporations depend heavily on exports and imports.
“Trade used to contribute about 20-25% of GDP, especially during the period of high growth in the mid-2000s,” Bhanumurthy said. “The service sector, especially the IT industry, would be a great success. We saw how some of the software giants promised the US that they would recruit locally for their global operations.”