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Cost of imports

Cost of imports

After the USA increased tariff rates on imports from its largest trading partner, taking tax rates to 25 per cent from 10 per cent, the world has been on the lookout as to how matters will now unfold. China's retaliation to this development is bound to have little impact on America as it is China that depends more on US than the US does on China. Exploring alternate market is an option that USA has for the goods it imports from China: mainly machinery, toys, sports goods, furniture, plastics etc.; but such is not the option with China that depends significantly on the US market. In the spillover of this commercial conflict, the economies of countries like India are put on alert. It is likely that China turns aggressive with exports and takes to dumping goods in order to regain its foothold in markets. Another possibility is that China depreciates the currency so as to get a competitive edge (as it happened in 2015). This is bound to have ramifications on other countries: a strong dollar and weak Yuan is no good news. Given India's clout in the world economy, there is certainly a need to review policies and practices as the repercussions will be volatile in both commodity prices and currencies with the escalation of this trade war. A non-retaliatory situation will strengthen the Dollar over Rupee. In the possibility of global trade getting volatile and impacting flow of investment, another development that has taken place is India lining up defence deals worth around $10 billion for the US over the next two to three years. This happened in spite of the ongoing trade war and concerns over migration, even though New Delhi and Moscow have worked out a deal to get around US sanctions against acquisition of Russian weapons. The procurement case of 10 P-81 aircraft was cleared by an MoD committee last week. It will be sent for approval to Defence Acquisition Council headed by the Defence Minister Rajnath Singh by August. These 10 P-81s will be more advanced than 12 such aircraft already procured by India. Meanwhile, as international affairs keep countries on tenterhooks, here at home, it cannot be emphasised enough the need for a state to fortify itself internally so as to cushion it from any external turn of events. Imports should not cost a nation the general welfare of its people.

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