Mint Quick Edit | Big-power war flares: What’s next?
China “played it wrong”, according to US President Donald Trump, referring to Beijing’s retaliatory 34% tariff on American imports in response to his extra levy of that rate as a “reciprocal” barrier to Chinese goods.
Also Read: Mint Snapview: Many countries will retaliate against Trump’s tariffs. India must not.
This marks a flare-up in economic warfare between the world’s top power and its chief challenger. It also makes many economists wonder if China’s response was knee-jerk.
Its reply to earlier tariff hikes was nuanced; it seemed aimed at reducing Chinese demand for stuff coming from US ‘red states’. This time too, it could’ve finessed its hit-back to pack a punch at US producers with minimal recoil impact on its own economy.
Also Read: US tariffs on China, Thailand may open door for India’s toy exports
Does China plan to substitute all its US imports? Maybe it expects to defend its bilateral trade surplus and thwart Trump’s latest tariff, whose rate is based on that gap as a ratio of its exports to America. Yet, the US-China trade balance cannot really be kept steady.
Also Read: Chinese history shows how a closed economy could squander a nation’s greatness
But is it a prelude to a currency-value battle? Under Trump 1.0’s salvos, Beijing got a weaker yuan to shield its export interests. Under Trump 2.0, complexity arises from his multiplicity of targets. Action in the currency theatre of war could heat up. India must stay alert.
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