It may look like a minor face-off, but Indian businessmen and investors would do well to keep an eye on the war of words between the US and China. What sparked off verbal hostilities is the decision by the US to impose heavy duties on a variety of glossy paper that is imported from China. The Americans claim that the Chinese are dumping this paper, an accusation that the other side hotly denies.
So why should we bother? There are two reasons why the trade war could matter to us. First, this could be the first sign that protectionism will increase as the US approaches its presidential election. It’s Chinese paper imports today. And it could be Indian outsourcing tomorrow. The other reason to worry is more immediate. The US dollar has already dipped because of this spat.
Some believe China will seek retribution by selling some of the dollars it hoards. A fall in the dollar could push up the rupee even further at a time when India’s trade deficit is growing.