US China Trade

Outlook

• The bulk of China’s annual soybean import of around 100 million tonnes is for domestic consumption; the rest is used in the manufacture of soybean oil and meal for export. If the levy hits China’s import, exports could be dented, a space that India could potentially fill to meet the demands from other countries.
• Within the US domestic economy, higher tariffs on a range of imported products escalate the threat of higher consumer prices, caused by importers passing on their increased costs of raw material. This could force the Federal Reserve to front load its interest rate glide path — raise rates faster than it would have done otherwise
• An increase in interest rates in the US has implications for emerging economies such as India, both for the equity and debt markets.
• Even a minor disruption in US financial markets can have major implications for India. The three external risk factors — higher tariffs, rising interest rates, and elevated bond sales — come at a time when the domestic banking system is grappling with a renewed stress of bad loans.