Moreover, chip manufacturers such as Intel and Qualcomm have also decided to halt the supply of critical components to Huawei. The apparent reason for the U.S. blacklisting Huawei is to stop the dominance this Chinese tech giant will have over the 5G infrastructure, if allowed to expand in the western markets unrestrainedly.

If Huawei takes the early-mover advantage in 5G technology, the Donald Trump administration fears that it might end up causing a serious threat to domestic security, given Huawei's so-called close connections with the Chinese Government and its Military.

Although it might look like Huawei is the reason of escalating tensions between the U.S. and China, but this is just a symptomatic cause. The real issue is political. Both countries are fighting for global dominance and economic might.

And the story doesn't end there.

Uncle Sam has issues with Iran due to its nuclear programme. China and Iran both aren't in a mood to give in easily.

As you would know, Google's most popular services such as Gmail, YouTube, and Google Maps are banned in China.

In 2018, China imported goods worth USD 120 billion from the U.S., while the world's largest economy imported goods worth USD 539 billion from China.

The Donald Trump administration has already slammed high tariffs on Chinese goods worth USD 250 billion. Furthermore, it has suggested imposing higher tariffs on Chinese goods worth USD 325 billion. In retaliation, China has increased duties on the U.S. goods worth USD 110 billion.

These are boiling issues in the American politics. And as the world's largest economy is getting closer to presidential elections, political leaders are likely to be more expressive and vocal about these issues.

When Uncle Sam sneezes, the entire world catches the contagion.

The global economies are going to suffer as these two giants fight over trade pacts and the world's largest economy tries to block the oil trade of world's one of the most prominent oil exporter.

Europe and India face the similar problems. They can't afford to take sides. They must remain neutral, or at least pretend to do so. Else, their exports will get affected. In fact, India has a huge dependence on Iranian oil. While the U.S. insists on its allies like India to cut off oil imports from Iran, it shrugs off its moral responsibility of not making its allies vulnerable to oil shocks.

Official comments of the Donald Trump Administration are telling.

Oil is owned by private people. So the government cannot force people to make concessionary price-Wilbur Ross, US Commerce Secretary.

On the other hand, India and Iran have been constantly working on deepening their ties. Both nations celebrated February 26^th 2019 as the Chabahar Day. As you might know, India has been operating the Iranian port Chabahar, demonstrating their commitment to bilateral trade and strategic cooperation.

Coming to Europe, Germen car manufacturers are expecting to find it difficult to have equal access to Chinese and the U.S. markets. Apparently, the German government has already asked its automakers to cut down their reliance on China.

Collectively, all these events are playing out as a part of reemerged global protectionism. It's a probably chance that old trade equations might become obsolete and new trading partners may emerge.

On this backdrop, the Indian economy must readjust itself.

And it's only obvious that the wave of global protectionism will affect Indian businesses and Indian markets. Experts believe the trade war between the U.S. and China is not necessarily going to yield poor results for India. In fact, India is likely to attract more Foreign Direct Investments (FDI) and Indian exports in key areas such as intermediate goods, Information Technology, textiles, and agriculture might receive a boost.

That said, the key would be to handle both China and the U.S. dexterously. China runs a huge trade surplus with India and the U.S. corporations are seeking more access to Indian markets. It remains imperative to see how it realigns trade relations with allies.

Smaller nations such as Vietnam, Thailand, Bangladesh, Indonesia, and Cambodia have been demonstrating more export competitiveness as compared to India. The mere rise in ease-of-doing-business is unlikely to help.

India's response to the trade war situations will decide how deeply Indian markets will be affected.

Here's what you can expect:

• Indian exports in certain categories may go up thereby brightening the prospects of some Indian companies.

• India may become a preferred manufacturing partner of U.S. and European MNCs as they move to cut back reliance on China. Rising FDI might provide stability to Indian Rupee.

• China, in order to protect their access to India, may open up its market further to Indian exports.

• India will have to implement the next level of reforms-land and labour reforms and energy security are likely to become critical areas.

How to position your mutual fund portfolio?

First rule of thumb, do not allow greed or fear to influence your decision-making. You should stop getting carried away by thematic investments based on tariff war escalations. Instead, trust the time-tested diversified mutual fund schemes and invest in them through Systematic Investment Plans (SIPs).

While selecting mutual fund schemes you should consider various quantitative and qualitative parameters, and not just recent returns. When you invest in diversified equity mutual fund schemes process driven fund houses offer, you need not worry about how trade wars will affect your mutual fund investments.

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