Should investors worry about the challenge against India’s export subsidies at WTO?
With global trade protectionism on the rise, it has been a bad start to the year for Indian exporters.
After imposing import tariffs on steel and aluminium products, US President Donald Trump on Wednesday challenged India’s export subsidy schemes at the World Trade Organization (WTO).
Note that India’s exports of goods to the US touched a multi-year high last calendar year (see chart). The US currently contributes around 15% to India’s overall exports and is among its key trading partners.
Should the US intervention at WTO be a worry for investors of exporting companies?
So far, investors have shrugged off the news, as the muted reaction of export-focused stocks such as Bharat Forge Ltd shows.
According to economists, this is not a unique development as there have been many instances in the past where Western countries have launched trade disputes against Asian countries for subsidizing exporters.
Further, reaching a conclusion on such complaints relating to anti-dumping is a long-drawn process. Also, since WTO has asked India and the US to bilaterally iron out the differences, it is too early to hit the panic button, they added.
That said, retaliatory responses by other countries like China and Europe could still set the stage for a global trade war, which is a key risk to both the global economy and companies that depend largely on exports.