Trade war: India to hike tariffs on US goods from Sunday

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Updated: June 15, 2019 6:59:16 AM

The decision comes ahead of the scheduled meeting between Prime Minister Narendra Modi and US President Donald Trump on the sidelines of the G20 meeting on June 28-29 in Japan.

The latest move to impose retaliatory tariffs worth 5 million comes just over a week after the US formally withdrew export incentives of roughly 0 million a year on Indian exports (Representational image)The latest move to impose retaliatory tariffs worth 5 million comes just over a week after the US formally withdrew export incentives of roughly 0 million a year on Indian exports (Representational image)

Having held back its tit-for-tat action for around a year, India has decided to slap retaliatory tariff on 29 US goods—including almond and apple—from June 16 in response to the Trump administration’s move last year to impose extra levies on steel and aluminium, in a potential escalation of trade tussle.

The latest move to impose retaliatory tariffs worth $235 million comes just over a week after the US formally withdrew export incentives of roughly $190 million a year on Indian exports of $5.6 billion under the so-called generalised systems of preference (GSP), dealing a blow to a trade deal that was negotiated for months. “The department of revenue will notify the decision (to levy retaliatory tariff) tonight or tomorrow,” said a senior government official.

The decision comes ahead of the scheduled meeting between Prime Minister Narendra Modi and US President Donald Trump on the sidelines of the G20 meeting on June 28-29 in Japan.

US secretary of state Mike Pompeo is expected to visit New Delhi on June 25 to have discussion with external affairs minister S Jaishankar.

In June 2018, after the US imposed 25% extra duty on steel and 10% on aluminium supplies from select nations, including India, New Delhi had informed the World Trade Organization (WTO) its decision to slap retaliatory tariffs, having failed to persuade Washington to give it a waiver from the levy. The initial plan was to implement the decision on August 4, 2018, which was then deferred several times, as New Delhi hoped to clinch a broader trade deal with Washington.

Amid his worsening trade war with Beijing, Trump earlier this month blamed New Delhi’s failure to assure Washington of “equitable and reasonable” market access for his decision to terminate India’s status as a GSP beneficiary. Earlier, he had termed India a “tariff king”. In a recent visit to New Delhi, US commerce secretary Wilbur Ross flayed India for imposing “not justified” tariff on ICT products (20%), motorcycles (50%) automobiles (60%) and alcoholic beverages (150%).

Although the immediate trigger for the GSP withdrawal by the US is said to be the tightening of India’s FDI guidelines on e-commerce, which are said to hit Amazon and Walmart-backed Flipkart, in certain cases the Trump administration’s demands were deemed unreasonable, said analysts. For instance, acceding to the US request to scrap/cut tariff on ICT products, including high-end mobile phones, would cost India as much as $3.2 billion a year. More importantly, it would help only third parties (like China and Korea). So, India was willing to lower duties on those products where it would benefit the US. Similarly, India had also offered to simplify certain certification procedures for dairy imports from the US. However, Washington remained unimpressed.

Stressing that India responded to the US requests on sticky issues positively, the commerce ministry here made it clear that New Delhi had proposed to replace the current price cap policy for coronary stents with a “suitable trade margin regime” to ease concerns of American manufacturers like Abbott Laboratories and Boston Scientific.

For its part, New Delhi wants the Trump administration to recognise that India is the only large economy whose goods trade surplus with the US has been shrinking (unlike China’s). In fact, in 2018, the surplus shrank $4 billion from the previous year. Also, India will remain the world’s fastest-growing large economy in the coming years, generating opportunities for US businesses in sectors ranging from defence and retail to oil. India is also a thriving market for US services and e-commerce companies like Amazon, Uber, Google and Facebook with billions of dollars of revenue.

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