by Pavas Gupta
Last week saw a rise in trade tensions across the world, as part of the ripple effect of the trade war between the US and China. This could be seen in a negative GDP prediction by the EU, and a widening trade deficit in India. At the same time, there has been a visible shift in trade partnerships the world over, due to the trade war, including Teslas memorandum of understanding (MoU) with Beijing, and South Koreas reduction of import tariffs on select Indian products. Here are five important economy stories from around the world.
Tesla signs MoU with Beijing following Trade War
Chinas attempt to protect its economy against tariffs imposed by the US government has proven successful. US electric-car titan Tesla signed a Memorandum of Understanding (MoU) with Beijing to build a fully-owned Gigafactory in Shanghai. This comes as an addition to multiple attempts by Beijing to woo Multi-National Companies by offering better investment terms, including lower ownership caps. In a statement, Tesla said it expected to complete the factory in two years time and to reach an impressive peak annual production of 500,000 cars two to three years after the unit starts functioning
South Korea reduces import tariffs on 17 Indian products
There has been significant improvement in bilateral trade terms between India and South Korea after the leaders of the two countries, Narendra Modi and Moon Jae-in, had set a target of increasing bilateral trade to $50 billion by 2030 from the existing $20 billion, last week. Under the Early Harvest Package (EHP), part of the upgraded Comprehensive Economic Partnership Agreement (CEPA), South Korea agreed to cut import tariffs on 17 Indian products, including shrimp, beer, jams & jellies, mango, corn, and maize. Similarly, India has agreed to reduce import tariffs on 11 items from South Korea, which includes marine base oil and fish fillets. On the seven identified fish items, South Korea has agreed to reduce the imports tariffs to zero% from 20% immediately for 15,000 tonnes. This will provide a huge opportunity to the exporters of shrimp and other fish varieties as Indias total exports to South Korea at present is just 2,400 tonnes, a Commerce Ministry official said, as reported by Business Line.
EU predicts lower growth forecast, blames trade wars
A European Union (EU) Executive predicted Eurozone growth rate at 2.1%, compared to 23% Gross Domestic Product (GDP) increase forecast from estimated released in May. This is also well below last years growth rate of 2.4%. Cited among the primary reasons for this slowdown are rising trade tensions with the US and an increase in oil prices that push inflation higher. Italy, with the slowest growth rate in the bloc, is expected to be hit hardest. The downward revision of GDP growth since May shows that an unfavourable external environment, such as growing trade tensions with the U.S., can dampen confidence and take a toll on economic expansion, EU commissions vice-president Valdis Dombrovskis said, as per a Reuters report.
Indian exports up by 17.57% even as trade deficit widens
Indias annual export rate increased by 17.57% to $27.7 billion in June, owing to a surge in exports of chemicals, electronics, petroleum products, cotton yarn and handloom, and pharmaceuticals. At the same time, however, an increase in import rate of 21.31% to $44.30 billion led to a widening of the trade deficit now at a 43-month high of $16.60 billion with respect to $12.96 billion in June last year. While exporters were, in majority, positive about the export growth, some expressed concern over increasing trade tensions among key economic players.
BNP Paribas claims RBI might hike key policy rates in August
According to a statement by BNP Paribas, the Reserve Bank of India (RBI) is expected to hike its key policy rates by 0.25% to 6.5% at its August monetary policy review. This comes one day after official data recorded an increase in inflation to a 5-month-high of 5% in June. “Consumer price inflation points out to a hike in August,” stated the French Brokerage in a note, Business Today reported. The statement comes after the RBI raised the repo rate to 6.25% in June. The RBI’s monetary policy committee is slated to begin its meeting on rate review starting July 30, and a final decision will be announced on August 1.
Pavas Gupta is a writing analyst at Qrius