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India Could Benefit from US China Trade Wars
So far, U.S and China have not come to a conclusion on how they are going to resolve the trade disputes during the Truce period(Dec’18 to 1 st Mar’19) which had been earlier agreed by both the countries. Initially there had been some positive cues that that trade talks are going well which had eased the tensions in the global markets and brought some incline in commodity prices of energy and base metals sectors. Conversely, recent sources have indicated that the trade talks have slowed down once again which has further brought in fear in the international markets. Moreover, imports tariffs that had been earlier imposed by both the countries have not been lifted and the impact for the same are still being witnessed by both the super powers of the world. Various experts in the United Nations are estimating that the tit-for-tat trade dispute between China and the United States may do little to protect domestic producers in either of the countries and could have a massive implications on the global economy unless it is resolved. However, based on recent reports by the United Nations, India is among the several countries that stand to benefit from on going trade tensions between the world’s top two economies – U.S. and China. Other countries could also include Europe, Mexico, Canada and Japan. The trade war between the US and China is expected to boost the Indian economy with a rise of 3.5% in exports taking home above $10 billion based on UNCTAD (The United Nations Conference on Trade and Development). The EU will be the biggest winner and are most likely to make $70 billion in additional trade, according to a UN study. In the case of Japan, Canada and Mexico, they are most likely to see exports increase by more than $20 billion each. Other countries that are likely to make above $10 billion include Australia, Brazil, Taiwan and Vietnam. Countries that are expected to benefit the most from US-China tensions are those which are more competitive and have the economic capacity to replace US and Chinese firms, the UNCTAD also mentioned. They further added that, if both the super power countries are unable to strike a deal before the deadline of March 1, the US as earlier said will increase tariff rates on $200 billion worth of Chinese goods from 10% to 25%. Imposing tariffs would make US-made products cheaper than imported ones, and encourages consumers to buy American products.
Commodity and Currency Outlook:
For the next few weeks, we are estimating INR currency to appreciate further as ongoing trade wars are likely to boost exports from India. Technically we could also observe sell on rallies for USDINR currency during the coming weeks. In the case of commodity sector, prices in the Base metals are likely to slump owing to the above geopolitical tensions. But then, this could prove beneficiary for Indian metal refineries as the import costs and the cost of production for the same is projected to be lower. Correspondingly, prices of Crude could also weigh down as other importing countries may extend/cut down the oil import deals signed due to ongoing trade tensions. Bullion metals may however remain supported and we may see gold prices sustain at current levels by the end of the February month. Note: - The reversal in the above outlook may be witnessed in case of any positive developments on the ongoing US China trade talks
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