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Last Updated : Mar 24, 2018 05:37 PM IST | Source: CNBC-TV18

China's strong retaliation to Trump's tariffs could trigger global trade war, says Gita Gopinath

President Donald Trump's decision to impose tariffs is worrying -- that's the word coming in from Economics Professor at Harvard and Financial Advisor to Kerala Government, Gita Gopinath. Speaking exclusively to Shereen Bhan, Gita said that we may be at the brink of a trade war if China strongly retaliates against Trump's decision. She added that India will also be affected with this tariff imposition in long term.

CNBC TV18 @moneycontrolcom

President Donald Trump's decision to impose tariffs is worrying -- that's the word coming in from Economics Professor at Harvard and Financial Advisor to Kerala Government, Gita Gopinath. Speaking exclusively to Shereen Bhan, Gita said that we may be at the brink of a trade war if China strongly retaliates against Trump's decision. She added that India will also be affected with this tariff imposition in long term.

Below is the verbatim transcript of the interview.

Q: Are you worried with Trump's tariff decision?

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A: I think that is consistent with how Trump has functioned, because there has always been a bit of disconnect between what he says and what actually gets done. Though I have to say that I am worried this time. For the last year and a half, we were all optimistic because Gary Cohn was still a part in his cabinet and that would have not happened, but he seems to have phased out most of the portrayed people and he has been advised by people like Peter Navarro or strictly anti-trade. So I am genuinely worried about it. The market is clearly not factoring it fully, but there is a high risk of something going horribly wrong on the trade side.

Q: What do you believe, what is it that you are most concerned about because China has of course said that they will retaliate, they have put together their own list of where they see retaliation possible. What do you believe could trigger the next round?

A: The concern is that China has said that they would put in these retaliatory tariffs. So that itself triggers a trade war. The next thing that happens is they are planning to complain to the WTO about US tariffs. The thing I am most worried about is if the US starts completely dismissing the whole WTO system.

Q: Would this be the single biggest risk factor when it comes to global growth and the global recovery that has looked fairly strong?

A: This is rather unfortunate. This is the first year when all economies in the world have been gaining steam and so this is an absolute game changer. If this really turns into reality and lasts for more than two tweets, I think this is hugely costly to the global economy.

Q: What could the implications be for India, because they have moved the WTO against us, and that process will play out. He keeps bringing up the Harley Davidson example in relation to India. What do you see are the implications for India in all of this?

A: Implications for India are big, just like any other country. So even if India is not a huge part of the global supply chain, if there is going to be disruption in economic growth in different parts of the world that rely more on the global supply chain, then it gets disrupted by this. It is going to have an effect on the Indian economy. So I am worried about it.

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First Published on Mar 23, 2018 07:38 pm

tags #Economy

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