President Donald Trump said on Saturday he will increase the global 10% tariff he announced one day ago to 15%, in reaction to the US Supreme Court’s ruling that his mechanism for applying tariffs was illegal.
“I, as President of the United States of America, will be, effective immediately, raising the 10% Worldwide Tariff on Countries, many of which have been ‘ripping’ the US off for decades, without retribution (until I came along!), to the fully allowed, and legally tested, 15% level,” Trump said in a social-media post.
Trump said that he was making the decision “Based on a thorough, detailed, and complete review of the ridiculous, poorly written, and extraordinarily anti-American decision on tariffs issued yesterday,” by the US Supreme Court. Hours after the Supreme Court ruling on Friday, Trump had imposed a 10% global tariff on foreign goods, moving to preserve his trade agenda.
The 15% additional tariffs are for all trade partners of the US as an interim measure.
What does this mean for India?
For India, this would mean an immediate reduction in reciprocal tariffs from 25%, without offering any trade-related concessions. The 18% tariff for India, mentioned in the February 6 joint statement issued by the US and India, was yet to take effect, and the two sides were targeting the interim deal’s rollout in April, as the new development muddied the situation.
The Commerce and Industry Ministry on Saturday reacted to the earlier announcement of 10% tariffs, saying it is studying the implications of the US Supreme Court judgment on tariffs and steps announced by the US administration.
“We have noted the US Supreme Court judgment on tariffs yesterday. President Trump has also addressed a press conference in that regard. Some steps have been announced by the US Administration. We are studying all these developments for their implications,” the ministry said.
There was no official reaction to the hiked 15% tariffs till the time of going to press.
However, after the initial announcement of 10% tariffs, experts said on Saturday the odds have increased for India to make trade terms with the United States more equitable.
The tariff reduction comes just weeks after the US agreed to cut additional reciprocal tariff on India to 18% from 25%. The joint statement also removed the 25% punitive tariff imposed on India for purchasing Russian oil. It also said India agreed to reduce or eliminate tariffs on all industrial goods and ‘a wide range of’ agriculture and food items, and stop purchase of Russian oil.
Global trade experts on US Supreme Court ruling
“The joint statement mentions that if either country changes the agreed-upon tariffs, the US and India agree that the other country may modify its commitments. Now that US tariffs have changed, India should use this clause to either opt out of the deal or delay negotiations or seek fresh terms, so that the trade deal looks equitable,” Global Trade Research Initiative founder Ajay Srivastava said.
“Circumstances have changed. The changed situation diminishes the value of the (proposed) interim agreement with the US. There is little justification to persist with the concessions we had agreed to. India needs to recalibrate its position on various issues in the ongoing negotiations with the US,” international trade expert Abhijit Das said. In the interim deal India was negotiating to bring down additional tariffs, but the negotiations should now be on getting the Most Favoured Nation (MFN) tariffs removed, Das added.
India-US trade deal
The India-US economic engagement includes a variety of issues other than tariffs and non-tariff barriers, with Washington keen to extract concessions from India on IPR laws, government procurement, etc.
The India-US joint statement also states India intends to purchase goods worth $500 billion from the US over five years, while trade experts feel this is difficult to adhere to, given the limited capacity of the US to export items which India needs.
An immediate fallout of the invalidation of the reciprocal tariffs is a demand from businesses for refunds of revenues collected by the US Customs through them. PwC estimates revenue collections till October-end at $108 billion, with India’s contribution less than a billion.
“The uncertainty still persists. We have to ensure that there are no further tariffs on India. We should be constructively engaged with the US so that no other retaliatory action follows. The Bilateral Trade Agreement (BTA) goes beyond tariffs, allowing concessions even on Most Favoured Nation tariffs,” said Ajay Sahai, CEO and Director General of the Federation of Indian Export Organisations (FIEO).
A team of officials led by the chief negotiator on the India-US trade agreement will be in Washington next week to finalise the legal text of the interim trade deal. However, in changed circumstances what would be the focus of the negotiations remains to be seen. The interim deal is a precursor to a full-fledged India-US BTA so the talks would continue, Das added.
Meanwhile, the Congress on Saturday demanded that Prime Minister Narendra Modi should put the India-US interim trade agreement on hold and renegotiate the terms of the deal in response to news of tariffs being applied at 10%. Congress general secretary in-charge communications Jairam Ramesh said the government must state categorically that there will be no import liberalisation till clear clarifications from the American side and ensure that Indian farmers’ interests are not hurt.
Speaking with reporters, Ramesh sought clarifications from the government on the India-US interim trade deal and called for renegotiating the deal afresh. The Congress alleged that the trade deal had become an ‘ordeal’ for the country subjected to by the prime minister’s ‘desperation and surrender’.
(With inputs from agencies)