Mumbai: Referring to the US-China trade dispute, the State Bank of India (SBI) on Friday said that such bilateral trade wars have never turned into full-scale global ones, while they provide am opportunity to countries like India to expand their trade.
In March, US President Donald Trump slapped import tariffs of 25 per cent on steel and 10 per cent on aluminium, unfolding the prospect of an all-out global trade war. China retaliated in April by imposing tariffs as high as 25 per cent on 128 American products.
In its latest Ecowrap research report authored by Chief Economist Soumya Kanti Ghosh, the state-run lender said that the "world history is riddled with instances of prolonged trade wars".
"Empirical evidence suggests that none of the trade wars which started bilaterally turn into a full-fledged multilateral trade wars, though the trade wars were prolonged for close to a decade in some cases," it said.
"Such trade wars may not necessarily have any impact regarding financial stability and markets eventually recovered in all cases of trade wars. In fact, during the 1993-2001 prolonged trade dispute between the US and EU, the US markets kept on rising.
"The (US) dollar has also started appreciating against the basket of six major currencies now that fears of full-fledged trade war between the US and China have dissipated."
"During the periods of trade dispute between France, Germany and the US in 1962, global trade continued to increase. Thus, a conclusion stating one-on-one relationship between trade wars and the world GDP growth will be too simplistic," it added.
Ecowrap pointed out that besides tariffs, America is also resorting to non-tariff barriers.
"Over the years, it can be seen that non-tariff measures have risen considerably. Such non-tariff barriers are more a manifestation of protectionist measures," Ghosh said.
Noting that the ongoing US-China dispute has not affected Indian stock markets, the report said it provides opportunities for other countries to expand their trade "and keep the momentum going."
"Interestingly, if the relationship between US and China leads to some reduction in
US exports to China and India capitalises on it by even trying to capture one per cent of the total Chinese imports from the US, we can see an additional 10 per cent increase in India's exports to China," the report said.
Union Commerce Minister Suresh Prabhu has said that in the face of such protectionist threats to global trade, India is making efforts to strengthen both the multilateral trading system as well its bilateral trade relations.
India has sought an exemption from the US tariffs along the lines of what has been allowed to the European Union, Argentina, Australia, Brazil, Canada, Mexico and South Korea.