US tariff on metals: India notifies plan to defer retaliation to September 18

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New Delhi | Published: August 5, 2018 3:05:57 AM

The move would allow more time to both countries to ensure a meaningful outcome to the ongoing trade and other negotiations.

India has notified its decision to defer levying retaliatory tariff worth close to $235 million on 29 US products, including almonds and apples, by 45 days to September 18. (File photo: Reuters)

India has notified its decision to defer levying retaliatory tariff worth close to $235 million on 29 US products, including almonds and apples, by 45 days to September 18. The proposed retaliation is against the Trump administration’s move to slap an additional 25% duty on steel and 10% on
aluminium supplies from select countries, including India.

The Indian move would allow more time to both the countries to ensure a meaningful outcome to the ongoing trade and other negotiations, apart from easing a tariff war, at least temporarily. India is hopeful of getting a waiver from the extra tariff on the metals.

Analysts have 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. It becomes difficult to negotiate meaningfully once retaliatory steps take effect, they have said. Sources had told FE that Washington wanted India to defer the plan, at least until talks between the two sides on a mutually-agreeable trade package
are over.

As such, India just became the first south Asian country to be added to the Strategic Trade Authorization-1 list by the US, paving the way for high-technology product sales to New Delhi, particularly in defence. While its talks are on with India, the US has stepped up offensive against China, announcing its plans to slap extra duty on goods worth $200 billion in a fresh offensive, on top of $50 billion earlier. Beijing, too, has warned of slapping additional tariff on $60 billion US goods now.

The US has indicated that it will consider an exemption to India from the extra steel tariff, provided New Delhi offers an acceptable proposal to lower the volume of its supplies. However, the Indian steel industry is unwilling to accede to such a demand by the US.

Following the recommendation by the commerce ministry, the revenue department has now amended its June notification that had suggested the tit-for-tat tariff action would kick in from August 4. 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 Organization (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.

What goes in India’s favour is also the fact that its goods trade surplus with the US dropped almost 6% to $22.9 billion in 2017 from the previous year, while most others, including China saw their trade surpluses having risen further. Even in the first quarter of this fiscal, India’s imports from the US jumped 38% while exports rose only 11.7%.

While China alone accounted for a massive $375 billion, or 46%, of the US goods trade deficit of $810 billion in 2017, India made up for just 2.8%. The Trump administration has been targeting select countries, mainly China, for their massive trade surplus with the US and seeking greater trade balance.

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