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  1. US tariff on metals: India defers response on trade deal hopes

US tariff on metals: India defers response on trade deal hopes

New Delhi’s decision to defer tit-for-tat action through a midnight notification on Monday comes at a time when both the countries are engaged in serious trade negotiations.

By: | New Delhi | Published: September 19, 2018 5:31 AM
Hoping to hammer out a mutually-acceptable trade package, India has deferred its plan for a second time to impose retaliatory tariff worth close to 5 million on 29 American products by 45 days to November 2. (Reuters)

Hoping to hammer out a mutually-acceptable trade package, India has deferred its plan for a second time to impose retaliatory tariff worth close to $235 million on 29 American products by 45 days to November 2. The proposed retaliation is against the Trump administration’s move to slap an additional 25% duty on steel and 10% on aluminium supplies from countries, including India.

New Delhi’s decision to defer tit-for-tat action through a midnight notification on Monday comes at a time when both the countries are engaged in serious trade negotiations. It is expected to ease a tariff war between the two countries, at least temporarily, when Washington has raised the stake in its trade war against Beijing by announcing extra tariff on around 6,000 Chinese goods worth $200 billion on Monday.

According to sources, as part of the trade deal, 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. India is a large market for stent makers and it imported medical instruments, including stents, worth around $1.6 billion from the US in the last fiscal, up 10% from a year earlier.

The US is also seeking to use a special tariff regime — generalised system of preference (GSP) — it offers to India and some others to extract greater market access from New Delhi and reduce a trade imbalance.

For India, greater access to the American market in food, farm, engineering goods, auto and auto parts segments hold promise in the long term (over five years). The US sees good prospects for its companies in Indian civil aviation, oil and gas, education service and agriculture segments.

Analysts say the move to defer retaliation when trade talks are underway is positive, as tit-for-tat actions, once implemented, tend to complicate negotiations. Earlier this month, both the sides held the so-called 2+2 dialogue to improve strategic and defence partnerships.

India had estimated that, based on its exports to the US in 2017, the Trump administration could garner a total of $241 million in extra revenue a year from the additional tariff on steel and aluminium supplies.

Accordingly, it had submitted its retaliatory plans with the World Trade Organisation (WTO) as well in June.

India had notified that the duty on American apples would be raised by 25% and almonds by 20%. Among other items, 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 would be levied. Almond is the biggest item for retaliation, as India expects to mop up an additional $122 million a year by imposing the extra tariff on the key American farm item.

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 2017 — a fact New Delhi has been highlighting in its talks with Washington.

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