US Firms to eye on India for rising trade war

Nine major economies around the world, including the UK, Germany, Russia, Singapore and Brazil, are on the brink of recession. The economic impact of the US-China tariff war will be astronomical. It is estimated to cost $585 billion to the global economy by 2021.

 
President Trump ordered US firms to move production out of China. But, the fact is many corporates and investors had signed multi-billion, multiyear USD contracts to further diversify their supply chains away amid the intensifying trade war.

Trump again took to Twitter, ordering American companies to “immediately start looking for an alternative to China” and build more products in the U.S. In doing so, he cited the International Emergency Economic Powers Act (IEEPA) - passed in 1977 to deal with an “unusual and extraordinary threat to the national security, foreign policy, or economy of the United States.

Trump said in attacking General Motors for its significant presence in China and questioning whether the automaker should move its operations back to the U.S. “Sometimes you’ve got to take stern measures,” White House economic advisor Larry Kudlow said alongside Treasury Secretary Steven Mnuchin on the sidelines of last month’s G-7 meeting in France. Kudlow added that American companies should heed the president’s call to leave China.

No U.S. president has invoked the law as leverage in a commercial dispute, let alone to sever commercial ties with one of its largest trading partners. Indeed, over the past century, U.S. administrations have mainly deployed the IEEPA to prosecute drug trafficking or financial terrorism through sanctions or other economic penalties.

U.S. companies had already started taking steps to diversify production amid flaring tensions over the past year, but this latest command forces a myriad of industries to grapple with escalating trade uncertainty.

Trump said last week he would raise existing duties on $250 billion in Chinese products from 25% to 30% on Oct. 1. Additionally, tariffs on another $112 billion of Chinese goods, which took effect on Sunday, are now 15% instead of 10%.

Few companies are planning to move completely out of China. Doing so would prove particularly disruptive for America’s industrial and technology heavyweights that rely on the Chinese manufacturing base as critical parts of their supply chains. China still makes roughly 25% of all manufactured goods around the world.

America’s other largest technology firms including Apple, HP Inc., Dell Technologies, Hewlett Packard Enterprise, Google Pixel phone are moving up of their production out of China.