India is set to defer its plan for retaliation against the American move to impose an extra 25% tariff on steel and 10% on aluminium supplies from this country by 45 days from August 4, upon a request by the US, sources told FE
India is set to defer its plan for retaliation against the American move to impose an extra 25% tariff on steel and 10% on aluminium supplies from this country by 45 days from August 4, upon a request by the US, sources told FE. New Delhi had proposed to slap retaliatory tariffs worth $235 million on 29 American goods, ranging from almonds to apples.
The move would substantially de-escalate a tariff war and indicates that New Delhi is willing to engage Washington further for a meaningful outcome to the ongoing bilateral trade negotiations. It also indicates that India is hopeful of getting a waiver from the extra tariff levied by the Trump administration on metal supplies from select countries, including India.
The commerce ministry has asked the revenue department to amend the latter’s June notification on proposed extra duties on US products suitably, a senior official said. Analysts said since both the countries will hold the so-called 2+2 strategic and defence dialogue in September, it makes sense for India to wait until then.
Sources said Washington wanted India to defer the plan, at least until the talks between the two sides on a mutually-agreeable trade package are over. New Delhi has already asked for a waiver from the additional duty on the metals.
The US has indicated that it will consider an exemption to India, provided New Delhi offers an acceptable proposal to lower the volume of its steel supplies. However, sources said the industry is unwilling to accede to such a demand, saying supplies are already limited by high counter-veiling and other duties imposed by the US.
The steel ministry will likely endorse this view and recommend against any capping of supplies at a certain level to enjoy additional duty waiver.
According to Jayant Dasgupta, former Indian ambassador to the World Trade Organisation, delaying retaliation is a move in the right direction, as it becomes very difficult to negotiate meaningfully once retaliatory steps take effect.
Commerce ministry data showed India exported 1.27 million tonnes of iron, steel and such products in the last fiscal, up over 30% from a year before, although exports in recent months have come under pressure.
Senior officials of the two countries huddled in Washington last month to hammer out a “trade package”, in which all the contentious issues – including the extra duties on steel and aluminium (10%) from India – were discussed. As part of their plans to firm up the “trade package”, both the countries have identified some key areas. India sees good prospects for its exporters in food, farm, engineering goods, auto and auto parts segments of the US in the long term (over five years). The US is interested in greater access to the Indian market in Indian civil aviation, oil and gas, education service and agriculture.
Earlier, the US had rejected India’s proposal to offer it an exemption from the extra tariff, prompting New Delhi to submit its retaliatory plans with the WTO in June.
New Delhi had estimated that the US could mop up $198.6 million in additional duty on steel and $42.4 million on aluminium, in its submission with the WTO. Accordingly, India had notified retaliatory plans – the duty on American apples will be raised by 25% and almonds by 20%. Among other items, India had notified an extra tariff of 10% on diagnostic reagent and binders for foundry moulds, 15% on certain steel products, 10% on select pulses and 15% on phosphoric acid. These duties were proposed to be made effective from August 4 unless both the countries work out a solution.
India has already conveyed to Washington that it’s one of the very few countries with which US’ goods trade deficit has decreased in the last one year – by almost 6% to $22.9 billion in 2017. In fact, India’s merchandise imports from the US jumped a massive 38% in the first quarter of this fiscal to $8.53 billion and the US emerged as India’s second-biggest goods import destination (after China). At the same time, its exports to the US grew only 11.7% in the June quarter. This means India’s merchandise trade surplus with the US could shrink for a second straight year.
India also wants delinking of a special tariff regime, called Generalized System of Preferences, from market access talks; aircraft manufacturing in India by US firms, among others. For its part, the US wants greater market access to reduce trade imbalance; and removal of price curbs on stents and other medical equipment.