Trade war between US and China would be a “lose-lose” situation: Rajan

Vastavam web: Former RBI Governor Raghuram Rajan today expressed concern over escalation of trade war between the US and China saying it would be a “lose-lose” situation if the two major economies carry out their threats. Rajan also cautioned that the situation can get “out of control very quickly” hampering global growth.

The Trump administration’s decision to impose tariffs on aluminium and steel imports had triggered a trade war with several countries including China, which announced retaliatory measures. “The great uncertainty is what happens with trade, if we have a trade conflagration in the next few months that could really hamper the global economy,” said Rajan in an interview to CNBC.

He further said that the key question is whether these bargaining ploys, threats of living tariffs et cetera result in real negotiation which create that win-win situation. “Or do entities, do players get locked into positions which mean they eventually have to carry out their threats in which case we are in a lose-lose situation,” Rajan said.Rajan is a finance professor at the Chicago Booth School of Business.

Replying to a query on Shangri-La dialogue, where Prime Minister Narendra Modi stressed India and China must work together for better future, Rajan said there is benefit in New Delhi having a good relationship with Beijing and vice versa because these are two big countries that can do a lot of activity, economic activity together.