Trade war and some policy alternatives for India

The trade war initiated by the US through inappropriate tariffs against its trading partners is not justified on several grounds. The President of the US has accused its trading partners several times of using higher tariffs on US products and sustaining a trade surplus with the US. In our analysis in this article, we find that though the US has a deficit in goods, it runs a surplus in services; though few trading partners apply high tariffs on US products, the US also protects its markets using excessive use of non-tariff measures. We assess the impact of the trade war, using four different sets of scenarios, on the economy of countries and the world using a global CGE model. Several policies for India have also been tested. We find that the trade war will be very detrimental to the entire world, including the US itself. The world GDP may go down by 14. In terms of change in GDP and welfare, almost all the countries will face a loss, except India. Though India may lose in several sectors like pharmaceuticals, processed foods, and energy products like coal, oil, and gas, India's economy will boom overall due to external demand. Though no-retaliation policy will benefit India, a tariff cut may boost India's GDP more than by 2. A significant tariff cut by India will surely generate a lot of jobs for both skilled and unskilled labor force.