Swaminathan Aiyar, Consulting Editor, ET Now, says the initial actions in what could become a prolonged trade war are just beginning. Retaliation is likely, and further conflicts are expected. As economic troubles deepen, Trump may blame others, predicting a long period of instability leading up to 2025. World GDP will slump, Indian GDP will slump, American GDP will slump.
Aiyar says don’t think India got away easy. On the basis of tariffs, everything will have to be recalculated. There will be all kinds of factories which can no longer export. Apple has a large plant in India exporting to the USA. Will it be able to export with a high import tariff that they are now going to levy upon us?
On expected lines, Donald Trump has really given an iron fist to the rest of the world. Fall in line or get ready. Do you think the tariffs that were imposed by the US administration last evening are on expected lines or they are stronger than what the world was anticipating?
Swaminathan Aiyar: People expected a little economic insanity, but this is economic insanity in spades. He called it Liberation Day. I think you better call it Recession Day or Stagflati ..
I am pretty sure this will lead to retaliation. We are in the middle of trade wars. I do not think everybody else is going to take it easy now. What is going to be the overall impact? World GDP will slump, Indian GDP will slump, American GDP will slump. There is going to be a catastrophic dislocation of all kinds of global chains. People will use that if it will go from here, here to there, here to there. Now on the basis of tariffs, everything will have to be recalculated. There will be all kin ..
Look at Apple. It has this large plant in India exporting to the USA. Will it be able to export with a high import tariff that they are now going to levy upon us? It will be very difficult. On the other hand, we have to see what happens in other places. Above all, he has this notion that the rest of the world is going to pay $600 million in import duties and this will enable him to cut import tax. He is going back to Mr President McKinley of 1896. All I can say is, sir, please do not get hung up ..
But it has been done and I look upon this as a tragedy unfolding to which we cannot do anything, that is the big picture. The smaller picture is what happens to Apple, what happens to pharma, what happens to individual stocks. The main thing is that this is ruinous news for India, for the USA, and for the world economy. We are going into a recession.
In a world like this, we all know the fate of equity markets. We have already seen the futures fall the way they are in the US. Having said that, do you see a shift towards, say, bullion or cryptos and what is going to happen to the dollar because that is really going to dictate how flows are going to move across the world.
Swaminathan Aiyar: Mr Trump is clear that he wants to make America great again by having very high tariffs, which he believes will lead t ..
As for what is going to happen to the dollar, when you have a 10% flat import duty, that is, in effect, like a 10% devaluation in terms of the currency. So, Mr Trump is trying, on the one hand, to make the dollar a little softer, no doubt about it, that is part of the game. But on the other hand, if you see the overall effect of the dislocation and of the high tariffs themselves, what it is going to do to supply chains, what it is going to do to demand in America itself? He was elected in order ..
Let me be a compulsive optimist here. I would say that, for India, the largest export component is IT. Nothing has come on IT. Second is pharma. Nothing has come on pharma. So, on a relative basis, some would say that India is in a better place. Because for China now, the tariffs are at 55%. For India, it is 26%.
Swaminathan Aiyar: No, you can say that in the ongoing tragedy, there was a supporting actor who did not do as badly. So, you can say that we will n ..
As I said, every other country is going to face that similar problem. If all that you are saying is that others will be hit to the extent of so many billion dollars and we will have a few billion dollars less, yes, that may be true. But I would say at the end of it all, you are going to be badly hit.
If you look further out, what will Mr Trump do if there is retaliation? His answer, I think, will be even more retaliation. So, you have a situation which is by no means complete. This is like the opening salvo in a trade war. Please do not believe that this is the end. This is not even the beginning of the end. It is the end of the beginning, to phrase Winston Churchill. So, please do not think that it is over after this. After this, there will be retaliation. There will be further wars. As Ame ..
Source Name : Economic Times