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Faced with a balance-of-payments crisis, India dismantled many import controls and let the rupee depreciate - a move that gave a much-needed boost to exporters and domestic producers competing with imports.

China has a "wide toolkit" for retaliation, he adds, such as depreciating their currency further or clamping down on US firms.

However, global uncertainties due to US President Donald Trump's tariff war, an outflow of foreign investor money and a depreciating currency - which could further weaken if rates come down - have complicated the RBI's task.

“Under the worst-case scenario, the Mexican economy will fall into recession, the currency will depreciate, and inflation will rise,” reads a report released by the economic research firm Moody’s Analytics.

During the last trade war, the country allowed the yuan to depreciate against the U.S. dollar, effectively making Chinese exports to the U.S. cheaper.