The two biggest powers in the world are engaged in a heated fight for trade which is US-China Global Trade Conflict.
- According to former RBI Governor Raghuram Rajan, the tension between America and China will deepen as the US presidential election approaches on 3rd November 2020, hampering US-China Global Trade Conflict that is “highly significant” developing economies, notably for markets like India, Brazil and Mexico, which will be significantly impaired by the pandemic and need some source of demand to bail them out as they start to open up again in the wake of the COVID-19 pandemic.
- Further he expressed, “the economy will have deeply wounded businesses, the reconstruction mechanism is needed to lead the post-pandemic turnaround”. Bankruptcies are expected in the U.S. and Europe as we fix the economy, reallocate money, and restructure capital structures. The key problem presently for countries like India and the US is to curb the obstreperous virus.”
- Rajan explained that US-China Global Trade Conflict vis-à-vis international trade would be a major factor for trade in products, services and digital media, as globally nations need an open environment.
- “There are nations, like the U.S, India, Brazil and Mexico where the containment did not happen despite shutdowns and huge costs, while in some countries re-openings took-off since containment lasted for 2-2.5-month cycle leading to cases of virus reduced to single digits”, he added.
- “This poses predicament over industries as they have no idea if there will be fresh shutdowns and how complicated it will be. Some states in the U.S. and India are demanding fresh lockdowns, while some even have executed it presently, he expressed.
Post pandemic reverberations
- Rajan also commented on a few of the post-pandemic dynamics that might arise. There definitely seems to be more worth working with the minds than with the hands resulting in adaptation to automated working culture, shuffling manpower after imparting training of new working ways, particularly as we go over the pandemic, he added.
- He stated that 45-50% of the population can work at home in developed countries, so that even in the middle of shutdowns the economies will continue working. Furthermore, the number of people who can work from home is much lower in poorer and developed countries and emerging markets. Lockdowns have become even more devastating to livelihoods and economic growth, as lower middle class have fallen deeper into poverty.
- Corporations, households and governments may experience mounted debts while passing the pandemic tunnel. The levels of bad loans may spike in banking sector which may result in the need for introducing restructuring processes so that entities can get back to work and production.
- The healthcare system will also witness the perennial focus for its sustainable development amidst and post the crisis. The conflict has led to the raised tariff of each other’s goods worth of trillion dollars.
The aftermath of pandemic has impacted the thrift and spending habits of the consumers as well as industries. The Chinese trade conflicts will only worsen the demand and supply forces further with no immediate recuperation in sight.
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