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India hits back with higher tariffs on US goods

/ 02:01 PM June 20, 2018

SINGAPORE — India has announced tit-for-tat increased tariffs on these items imported from the United States, following a US decision to increase duty on aluminum and steel from India in March.

Motorcycles, apples, chocolates, almonds and shrimp – these are some of the items caught in the crossfire of a bubbling trade dispute between the world’s two largest democracies.

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The Indian Ministry of Commerce and Industry notified the World Trade Organisation (WTO) on Wednesday last week that it would hike tariffs on 30 American goods by up to 50 per cent.

With the counter import duties, India now expects to recoup the estimated US$240 million (S$326 million) it has to pay for its steel and aluminum exports due to higher US tariffs.

Describing the US as a “piggy bank that everyone is looting”, President Donald Trump has set his country on a collision course with a range of trading partners by announcing unilateral trade tariffs.

India is among the countries Mr Trump has lashed out at. Speaking at the Group of Seven (G-7) summit in Canada this month, he said: “This isn’t just G-7. I mean, we have India, where some of the tariffs are 100 per cent. A hundred per cent. And we charge nothing. We can’t do that.”

Indian Prime Minister Narendra Modi has, on the other hand, sent out a strong message against protectionism at the recent Shangri-La Dialogue in Singapore. He argued that “solutions cannot be found behind walls of protection”, and asserted that India stands for an open and stable international trade regime.

One group that will be hit hard by the tariff war – American apple growers, who are worried they will lose out in India, their second biggest export market after Mexico. Washington Senator Maria Cantwell said in a tweet last Thursday that increased tariffs “would have a grave impact on Washington’s growers”.

Last year, the US goods trade deficit with India was US$22.9 billion, a 5.9 per cent decrease over 2016. US goods exports to India last year amounted to US$25.7 billion, with imports from India totalling US$48.6 billion. India is one of the few countries with which America’s trade deficit has decreased in the last one year.

Dr Rajat Kathuria, director and chief executive of the Indian Council for Research on International Economic Relations, believes India’s tit-for-tat move results from “partly feeling wronged by an action that is sort of unjustified” and a growing confidence that comes with a stronger economy.

“India today is a market that other countries are looking at as a large enough market to be present in. Its bargaining power in some sense is much more than it was earlier,” he said.

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But he reiterated the importance of resolving disputes through the rules-based trading order.

“I think we should learn to deal with these decisions with a little bit of caution and with our longer-term interests in mind,” he said.

Dr Rajesh Chadha, a senior fellow at the National Council of Applied Economic Research, suggested that a collaborative approach by lndia and other affected trading partners of the US would be an apt “tit-for-tat”.

“What India may simultaneously be doing is getting into a discussion mode with other aggrieved parties like China, other Bric members (Brazil, Russia, India)… to come up with a common ideological position on what should be the response to Trump’s measures,” he said.

“This is more so if India wants to emerge as the leader to take the world back to being led by the WTO and if it wants to become a significant player in mega trading blocs like the Regional Comprehensive Economic Partnership,” he added.

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TAGS: Asia, Business, India, tariff, Trade, US
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