InvestorQ : What is the trade war between US and China and why does Nifty and Sensex react so much?
shrinidhi Rajan made post

What is the trade war between US and China and why does Nifty and Sensex react so much?

Roshni Hegde answered.
3 years ago
Sensex dropped to 454 points in early trade yesterday, 7th May 2019.
After US President Donald Trump announced about the imposition new tariffs on China goods, many hopes looked forward towards good trade.
While Nifty dropped to around 127 points, to settle below around 11,600-level. It indicates poor trade relations between US and China. But the plummeted Indian benchmark indices is lesser as compared to the global market.
The reason for the sudden fall in the global markets is due to the recent disclosure of trade plannings by US President Donald Trump over doubling the tariff rate on USD 200 billion of Chinese goods.

Riya Dwivedi answered.
3 years ago

The trade war between the US and China has been going on for close to a year now. The US runs a trade deficit with China (imports more than exports) of $620 billion with China and when Trump got elected he had promised to reduce this deficit. Trump has made two accusations on China viz. they were dumping products cheap into the US and secondly they were misusing the intellectual property of large IT and pharma companies operating out of China. Currently, the import duty on Chinese imports is around 10% and the US is now planning to increase this import duty to 25%.

Why does this matter to India? When import duties are raised, then China will also retaliate. That means; there is loss of jobs in both the countries and lower growth. Already IMF has stated that because of trade war the growth would fall by 0.3%. This will impact India’s export markets. Also, it is possible that China may weaken its Yuan and so rupee will also weaken. All these are risks for India and that is why the Nifty and Sensex are also falling so sharply.