Trade wars: India may defer retaliatory tariffs against US yet again

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Updated: January 30, 2019 7:00:24 AM

However, India is the only major country whose goods trade surplus with the US narrowed in both 2017 and 2018 — a fact New Delhi has been highlighting in its talks with Washington.

Interestingly, given the fact that the US accounts for only 2% of India’s annual imports of the seven ICT products on which it is seeking duty waiver/cut, its demand has baffled officials here.

India will likely defer its plan for a fifth time to impose retaliatory tariff worth close to $235 million on 29 American products, in response to the Trump administration’s extra levy on supplies of steel and aluminium. Sources told FE that the government could postpone the tit-for-tat action by 30-45 days from the revised deadline of January 31.

Last year, the US had slapped an additional 25% duty on steel and 10% on aluminium supplies from countries including India. New Delhi had initially planned to impose the retaliatory tariff from August 4 last year. The repeated deadline extension suggests New Delhi is willing to engage Washington further for a meaningful outcome to the ongoing negotiations.

New Delhi’s latest move comes at a time when both the countries are engaged in negotiations to firm up a mutually-acceptable trade package. It is expected to keep a tariff war between the two countries from flaring up, at least temporarily. Washington already raised the stake in its trade war against Beijing by announcing extra tariff on around 6,000 Chinese goods worth $200 billion in December.

According to sources, as part of the trade package, while a waiver from the extra duties on the metals is still being pushed hard by New Delhi, among others, the US wants India to remove price cap on bioresorbable stents and remove or substantially prune the import duties on key ICT products, including high-end mobile phones and smart watches.

India is a large market for stent makers; it imported medical instruments, including stents, worth around $1.6 billion from the US in the last fiscal, up 10% from a year earlier. Interestingly, given the fact that the US accounts for only 2% of India’s annual imports of the seven ICT products on which it is seeking duty waiver/cut, its demand has baffled officials here.

The US is also seeking to use the concessional tariff it offers to India and a number of other countries under its so-called generalised system of preference (GSP) to extract greater market access from New Delhi. In November, the US dropped as many as 50 Indian goods from the list of items, supplies of which were earlier eligible for concessional tariff under GSP.

The two sides didn’t hold the annual trade policy forum meeting last year (it’s usually convened around October), in a sign that bilateral relations were far from perfect despite improving trade balance in favour of the US, which the Trump administration has been seeking from New Delhi.

India made up for just 2.8% of US goods trade deficit in 2017 and occupied the ninth spot in the list of nations with which the Trump administration seeks to pursue a trade balance agenda. However, India is the only major country whose goods trade surplus with the US narrowed in both 2017 and 2018 — a fact New Delhi has been highlighting in its talks with Washington.

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