International Trade

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Introduction to The Home Country’s Trade Balance

The COVID-19 epidemic is the most significant humanitarian calamity of 2020. Above two hundred territories and centuries have ensured active remedial cases, caused by COVID-19, which acknowledged by the WHO. Besides, COVID-19 is the global humanitarian crisis. The virus has spread around the world, creating a health system amid unprecedented pressure to save lives. The level of human tragedy has begun to worsen as the virus has spread to low-income countries, including low-quality health care systems. Furthermore, the world is observing the massacre of COVID-19 epidemic. There has been a lot of loss of human life and a terrible impact on the world economy. In addition, the global market is in free fall with supply-chain disruption as well as production deteriorating to their lowest levels in decades (Mishra et al. 2020). This study will determine how Covid-19 pandemic and trade tensions among the US and China affect the trade balance of India.

Discussion on The Home Country’s Trade Balance

Impact of the Covid-19 pandemic on trade balance of India

India is a foremost trading partner with several nations in the world. While the trade deficit continues, the gap within the country's exports and imports has narrowed over the past few months. This trend will continue as global oil prices fall. India's dominance in a number of sectors, for example gems & jewelry, mineral fuels, pharmaceuticals, textiles, chemicals, food products, and engineering products plays an important role in shaping world standards. The decline in exports is mainly because of the current global recession that has been exacerbated by the current Covid-19 crisis. This was followed by a major breach in the supply chain and the cancellation of the order resulted in a claim (Mishra et al. 2020).

According to the latest global economic viewpoint released by the IMF in mid-April, India and China remain the only two major economies that will not deal because of the global recession caused by the COVD-19 epidemic. These two nations and their peers from the ASEAN, will be the driver of post-COvid-19 recovery in the next decade. Moreover, These Asian nations must use “cautious optimism” to create a new world again, while the gist still remains that these nations, especially China, will attempt to integrate large import markets, mainly the European Union and the United States. Several ASEAN governments have now proclaimed financial packages for their respective economies that also seeks to develop their MSMEs and exporters. It is only expected that the Government of India will sue, with demand for a package of financial incentives and relaxed access to the credit for MSME gaining system.

In other words, the highest COVID-19 exposure in the Indian sector was related to authentic products, which accounted for about 18% of total export basket of India, such as clothing, transportation, and clothing sectors. Moderate exposure is seen for India's top 3 exports, such as fuel, chemicals and stone and glass, which account for more than 40% of India's exports. Besides, these sectors are less dependent on the export markets, for example rubber, plastic, vegetables, animals, and food products at the lowest risk of exposure (Nicola et al. 2020).

For the second month in a row, Indian exports rose by a record 60.28% in April to $10.36 billion, particularly due to the corona virus. Imports also fell by 58.65% to $17.12 billion in April, with a trade deficit of $6.76 billion in contrast to $15.33 billion in April 2019 (The Economic Times. 2020).

Due to the social distance caused by the threat of Covid-19, the inclination of customers to overstock on necessary products such as flour, rice, and lentils. It provides an increase in the sales of FMCG firm sales that led to a decline in business shares because of distorted supply chains. The e-commerce sector has eased supply chain pressures and increased the company’s expectation to focus directly on customer expectations with new distribution channels. In this emerging environment, demand management and key issue forecasting will have an impact on the customer relations sector. Product classification into categories shows varied responses to a non-essential and essential product within the market (Ghosh, 2020).

Impact of trade tensions between the US and China on trade balance of India

China and the United States are major world powers in terms of defense budgets, economic size, and global greenhouse gas emission. Moreover, both countries are permanent members of the UN Security Council. During 2017, they became the largest business partner. The bilateral relations are treated with most of the people in the world that most of them came back to. The global significance of the U.S. economy and Chinese economy, as determined by nominal gross domestic product (GDP), can be described in two ways that will also show the challenges of existing power transmission, including China’s growing economy relating to US GDP; other emphases on the related change in globalizations (Wike and Devlin, 2018).

The stock market can have short-term effects. The benchmark Sensex at the Bombay Stock Exchange is in line with the global market, which is rising due to the trade war between China and the United States. In the long run, although the US may not be ready to wake up to emerging markets during the economic downturn, trade wars could be a silver lining for some countries. According to a United Nations report, India is one of the handful of economies to advantage from trade tensions among top two countries in the world. In this way, around $300 billion in Chinese exports subject to US tariffs, just about 6 percent will be collected by companies in the United States, according to a report released in February at the UN Conference on Trade and Security (UNCTAD). EU members are expected to make the most money, as block exports will increase by $70 billion. Then again, other countries are benefiting from the trade tension, including Australia (4.6%), India (3.3%), Brazil (3.6%), the Philippines (3.2%), and Vietnam with 5% export gains.

For more than a year, trade wars have been raging between the two largest countries in the world, the United States and China. It has reached a major stage in international trade talks without any clarity on the road ahead. Considering these products, China is the largest trading partner in the United States and trade-related tensions between the two economic giants could open up many avenues for other countries, including India. In 2018, total trade between China and the United States was $737 billion. The trade balance is very skewed in favor of China as the United States imported Chinese commodities worth $558 billion as well as its exports to the country increased by only $179 billion. The US trade deficit with China is $379 billion. Compared to US-China trade, the total trade of India with the United States in 2018 was about $142 billion. The size of the US-India is less than 20% of China-US trade. But it can shift to India’s advantage because China-US trade tension has opened new way for other nations. This opens up new chances for other nations, such as Vietnam, India, and Malaysia. In the first half of 2019, India exported about $755 million worth of chemicals, ores, and metals because of Washington's trade war with China (Tam, 2020).

Because of the trade war, Malaysia and Vietnam, particularly in the ICT sector, may benefit the most from factory moves from China. Moreover, India is also attempting to take benefit of the state of affairs. Indian exporters will be able to take advantage of three separate sectors, like Information Communication, and Technology (ICT), garments, and a few automotive components. The ready-made garment and apparel sector are poised to see some opportunities as opportunities and space to reduce Chinese exports. During the Covid-19 epidemic, the trade tensions deteriorated beyond verbal contempt. The Trump administration ended India's position in the GSP, with India being the most privileged country, with access to more than a quarter of U.S. exports to the United States in 2017. More than 12% of all Indian exports (worth $5.58 billion) to the United States in 2017 have benefited under the GSP scheme. India replied by levying duty on 28 US products. The amount of duty for walnuts was increased by 120 percent, but the duty on grams and some lentils was increased to 70 percent (Tam, 2020).

A significant point to note is that almost all exports of the commodity group have declined. Some products have declined by more than 30-40%, mainly textiles, engineering products, meat, plastics, cereals, and chemicals that have seen a major increase in exports in current year. Because the COVID-19 epidemic spread to more than one country, global demand fell sharply and many orders were canceled (Tam, 2020).

The recent events have made it problematic for India to accept the situation in this year, when US President Donald Trump announced the withdrawal of billions upon billions in benefits for Indian exports. The General Preference System (GSP) provides unilateral benefits for developing countries in the United States. America to be able to trade with the United States in a variety of ways. The withdrawal of GSP benefits may counterbalance the relative benefits of India. On top of the withdrawal of GSP benefits, future unpredictability and uncertainties also hinder the opportunity of India to use these terms to their advantage (Woo, 2011).

Conclusion on The Home Country’s Trade Balance

At one point, the awareness was created that these countries needed to ensure adequate capabilities in the industries required for national defense. The political and economic catastrophe caused by COVID-19 gives the country a chance to make difficult decisions. Countries like the US, which are at risk of moving away from China, are now being given the opportunity to take steps that could be questionable. Also, India is waiting for the rest of the reforms. As part of this, the United States must ignore the fact that China will accept others who demand a level playing field, second-class status, and ultimately at a change of regime.

References for The Home Country’s Trade Balance

Ghosh, J., 2020. A critique of the Indian government’s response to the COVID-19 pandemic. Journal of Industrial and Business Economics, 47(3), pp.519-530.

Huang, Y., 2019. US–China economic tensions: origins and global implications. China International Strategy Review, 1(1), pp.127-138.

Mishra, A.K., Rath, B.N. and Dash, A.K., 2020. Does the Indian Financial Market Nosedive because of the COVID-19 Outbreak, in Comparison to after Demonetisation and the GST?. Emerging Markets Finance and Trade, 56(10), pp.2162-2180.

Nicola, M., Alsafi, Z., Sohrabi, C., Kerwan, A., Al-Jabir, A., Iosifidis, C., Agha, M. and Agha, R., 2020. The socio-economic implications of the coronavirus pandemic (COVID-19): A review. International journal of surgery (London, England), 78, p.185.

Tam, P.S., 2020. Global impacts of China–US trade tensions. The Journal of International Trade & Economic Development, 29(5), pp.510-545.

The Economic Times. 2020. Exports Plunge By Record 60.28%In April; Trade Deficit Lowest In 4 Years. [online] Available at: <> [Accessed 3 October 2020].

Wike, R. and Devlin, K., 2018. As trade tensions rise, fewer Americans see China favorably. Pew Research Center, 28.

Woo, W.T., 2011. The importance of being earnest in defusing US–China trade tensions. Rising china: Global challenges and opportunities, pp.173-180.

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