India’s economy may suffer “collateral damage” on account of escalating trade war triggered by the US President-elect Donald Trump with Mexico and China and the country must take “pro-active” steps to protect its business interests, Assocham said in a report.
Sectors such as information technology and select goods exports by India to the American market may suffer the maximum impact of the scenario, according to the study by the chamber.
“Though China and Mexico are in direct firing line of Donald Trump, India needs to watch out and must build bridges with the upcoming US administration and assuage the concerns about the American jobs,” Assocham said in a status paper on the regime change in the US.
"Those who thought the Trump threat to the American companies against job outsourcing to China and Mexico, particularly in the manufacturing, was only an election rhetoric are in for a rude shock," it added.
The chamber observed that “Trump’s threat to protect the US interest in an inward looking manner is for real now”.
It said India should not sit and watch the trade war among the big economies, mainly the US and China from the sidelines.
Instead, the country must take pro-active steps to ensure that it remains on the right side of the upcoming US administration or else the impact could be on the Indian services exports to the American firms.
According to the paper, the collateral damage for India would not only come from the US but also from China as well.
“With its economy being aggressively export driven, particularly in manufacturing, China would look for alternative export destinations outside the US in Europe and Asia,” the paper said.
Assocham claimed that in the coming months, China would double up dumping of its goods to countries like India as it gets entangled with the US over trade barriers.
The dumping from China has been quite severe in the recent few years in areas like steel aggravating the problems of the Indian industries, it said.
Under the given circumstances, the Indian government along with trade bodies like apex business chambers, influential think tanks, opinion leaders and a large diaspora must work for an effective lobbying to explain to the US policy makers as to how free trade, more so, in services would help both the US and the Indian companies, Assocham said.