Trade tariffs Trump Advertisement Advertisement Advertisement Advertisement Last week, the Indian government told the WorldOrganisation that it intended to increaseon around 30 goods imported from the US. This checklist of imported items included high-end motorcycles, shrimps, almonds, industrial machinery and chemicals.The higher tariffs, which come into effect later this week, are a direct response to the 25% and 10% duty, respectively, that the US had levied on all steel and aluminium imports. India had hoped for an exemption from theadministration, but its requests fell on deaf ears.The move, in principle, amounts to a zero-sum exercise, according to officials from India’s commerce ministry. The tariffs on steel and aluminium imports from India is estimated to cost the Indian government around $240 million. As a result, the list of items to impose reciprocal tariffs upon was compiled with the goal of earning back that $240 million.These tariffs are a symbolic gesture in many ways. The Indian government knows it has to counterbalance the need for retaliation with the preferences of domestic consumers of these imported goods, who will feel the impact of a rise in prices.Hence, the punitive measures will only affect trade between the two countries to a limited extent. And it will barely register to the US, in an absolute sense, since it exports $1.4 trillion worth of goods.None of the aforementioned goods are necessary for the daily functioning of Indians. Motorcycles were included on the list since the Trump administration repeatedly singled out India’s trade treatment of Harley Davidson motorcycles.India is also presenting a united front along with other US trade partners like China and the European Union, who are also proposing to enforce tariffs against US goods.China’s case in particular, is a lot more pressing in terms of the total value of trade impacted. The US’ tariffs on steel and aluminum imports will affect $50 billion worth of Chinese products. In response, the Chinese government is slapping higher duties on 545 categories of goods , including electric vehicles and chicken - a move that will affect $34 billion worth of products, pending an additional $16 billion.Trade representatives from both the US and India are set to meet at the end of June to address a number of trade-related issues, including agricultural subsidies and increased tariffs on certain goods.The higher tariffs on the imports of 30 goods from the US are an important bargaining ploy in this regard, to show that India is capable of reciprocating any unfavourable measures from its large trading partner.<doc-sep>An expert's point of view on a current event. India Is the Latest Front in Trump’s Endless Trade War U.S. President Donald Trump has been starting trade wars on all fronts, with escalating spirals of tariffs between the United States and its three main trade partners: the European Union, China, and NAFTA. But there’s a smaller yet no less significant part of the protectionist tit for tat that’s been overlooked: the fight between the United States and India. This quarrel has the potential to erode the burgeoning strategic partnership between the world’s two largest democracies, which have been closely aligned in military and counterterrorism fields with the goal of stabilizing the Indo-Pacific region and countering the rise of China. Trump struck the first blow with his steel and aluminum tariffs. India tried hard to get an exemption but failed. And so, on Thursday India began imposing what it deems proportionate payback worth $240 million on 29 American export items including almonds, chickpeas, and chocolates, with 28 tariffs taking immediate effect and a duty on shrimp rolling out on Aug. 4. [Trump’s tariffs are starting trade wars on every continent. Here’s a set of charts listing them all—and how countries are retaliating.] The U.S. side was pressing for trade reciprocity even before the Trumpist trade hawks swooped in. Since President Bill Clinton’s administration, the United States has filed six separate cases against India at the World Trade Organization. Despite these conflicts, the deepening of geopolitical cooperation rarely halted. But the unilateralist and rigid way the current U.S. administration is closing its market to imports while simultaneously demanding concessions for its exports has rattled India as much as it has the rest of the world. India was already on the radar of the’ neomercantilists calling the shots in Washington, although not to the same glaringly visible extent as China, the EU, Canada, and Mexico. U.S. Trade Representative Robert Lighthizer has challenged India’s export subsidy policies as instruments “to sell their goods more cheaply to the detriment of American workers and manufacturers.” He initiated a case against India at the WTO in March, the first such complaint since 2013, and also threatened to revoke the non-reciprocal trade benefits India enjoys under the Generalized System of Preferences by virtue of being a developing nation. Trump himself has chided India for placing barriers to Harley-Davidson motorcycles by lamenting that “we’re getting nothing” from India. In the services sector too, Trump and a Republican Congress have cracked down hard on the previously relatively easy route for skilled Indian information-technology sector workers into the United States. The United States is India’s single largest trading partner, with the two-way flow totaling more than $100 billion or more a year, and total trade makes up 40 percent of India’s GDP. There is considerable worry that Trump’s trade war will jeopardize India’s economic boom, with GDP growing at 7.7 percent in the last quarter of 2017. Indian equities and stocks fell by over 1 percent as the shadow of Trump’s trade war descended, reflecting worries not just about the tariffs but about the reduction of U.S. foreign direct investment into India, and for the fate of Prime Minister Narendra Modi’s signature “Make in India” manufacturing initiative. Modi’s push to transform India into a manufacturing superpower depends on the free flow of capital and the openness of global markets. India feels unfairly singled out because its trade surplus with the United States, at just shy of $25 billion, is so small compared to China’s nearly $350 billion, or even to Japan’s $69 billion, Germany’s $65 billion, or Mexico’s $63 billion. Modi’s officials have attempted to juxtapose India with China and argued that the former poses “no such thing as a security threat to the U.S.” The Make in India program is far more modest than the Made in China 2025 high-tech industrial policy under which China aspires to surpass the United States in strategic fields like semiconductors, artificial intelligence, and aircraft manufacturing through massive subsidies from the Chinese government. Unlike China, which is breathing down the neck of the United States in cutting-edge sectors, Indian industrialization is still relatively immature and not top of the line. Some strategists even contend that a full-blown U.S.-China trade war would benefit India, as friction between Washington and Beijing might redouble New Delhi’s value in Washington’s eyes as a less confrontational actor. But none of these arguments worked against Trump’s ideological convictions, which demand all-out economic confrontation and dismantling the WTO-based order. India is finding that, however different it is from China, there are no exemptions in Trumpland. So inflexible is Trump that invocations of the “strategic partnership” between India and the United States and Washington’s designation of New Delhi as a “major defense partner” have not moved the needle on tariffs against India. Sophisticated suggestions, like that of the U.S. House Speaker Paul Ryan (R-Wis.) to deploy tailored tariffs that hurt only China while avoiding broader damage, is music to Indian ears that finds no audience in the White House. Much to New Delhi’s discomfiture, the present U.S administration has little consistent interest in geopolitical rebalancing vis-à-vis China, which is the de facto foundation of the U.S.-India strategic compact. With treaty allies of the United States like Japan and South Korea themselves being subjected to trade punishment despite their crucial roles in countering China’s military and economic domination of Asia, India is finding that its own importance for the mercurial Trump is equally uncertain. Yet, given the existential dread that informs how India views the rise of its giant neighbor China, Modi’s government has preferred to tone down the criticism of Trump’s trade harshness so as not to alienate the United States completely. India’s rhetorical reaction has been muted compared to other participants in the burgeoning trade war; even while filing suit against the United States at the WTO, India is still keen to work out its trade differences with the Americans through bilateral channels without spoiling strategic coordination. But these softly-softly methods are unlikely to cut any ice with an administration locked into the zero-sum logic of Trumpian economics and barely cognizant of geopolitical nuances.<doc-sep>Today’s Headlines The most important news stories of the day, curated by Post editors and delivered every morning. By signing up you agree to our Terms of Use and Privacy Policy<doc-sep>Rates to come into effect from August 4. India has notified higher tariffs on several items imported from the United States, including agricultural products such as apples, almonds, chickpeas, lentils, and walnuts, and industrial inputs such as some grades of iron and steel products, in the latest salvo in the ongoing tariff tiff between the U.S. and several of its trading partners. The notification, however, says that these higher tariffs would come into effect from August 4, leaving room for further discussions between the U.S. and India before the new rates are implemented. Wednesday’s action follows the government’s notification to the World Trade Organisation (WTO) last week, saying that it was imposing tariffs amounting to $240 million in retaliation to the U.S. action on steel and aluminium. The notification did not mention a tariff hike on 800 cc (or more) motorcycles, which would affect Harley Davidson imports, already a sore point. “The Commerce Minister has said that he will be having more talks with the U.S. on the trade issues, and so the later date [for the implementation of the tariffs] is to give time so that they can be amended following the talks,” a Finance Ministry official said on the condition of anonymity. “But the notification also shows that we are serious about the issue,” the official noted. India’s move comes close on the heels of escalating trade tensions, with the U.S. and China both imposing hefty tariffs on each other, and even the European Union joining the fray. Trumps signs order The issue began in March, when U.S. President Donald Trump signed an order imposing a 25% tariff on steel imports and a 10% tariff on aluminium imports, causing concern among its trading partners and members of the WTO. Recently, International Monetary Fund chief economist Maurice Obstfeld highlighted the detrimental effects of such a trade environment, saying that “the prospect of trade restrictions and counter-restrictions threatens to undermine confidence and derail growth prematurely.” “The U.S. has more sustaining power. It’s a large economy,” Dharmakirti Joshi, Chief Economist at Crisil told The Hindu. “But what it does mean is that the costs at both the ends would go up, for Indian consumers as well as for U.S. consumers. Imposing tariffs basically means either you look for other sources, or you import at higher prices. That’s the general direction this is going, and now it has intensified. Of late, it was rhetoric, but now these are actions.”<doc-sep>
Centre conveys decision to raise import duties on 30 items to WTO, may further suspend concessions In what could signal escalating trade tensions between New Delhi and Washington, the Centre has written to the World Trade Organisation (WTO) notifying its decision to increase import tariffs on 30 items from the U.S. amounting to $240 million, in retaliation against tariffs imposed by the latter on aluminium and steel imports. The move is significant as it comes a day after Commerce Minister Suresh Prabhu returned from the U.S. and just weeks ahead of further talks between the two countries on the issue. “India hereby reiterates its decision to suspend concessions or other obligations notified to the Council for Trade in Goods on 18 May 2018… that are substantially equivalent to the amount of trade affected by the measures imposed by the United States,” the Centre said in the notification to the WTO’s Council for Trade in Goods. “The proposed suspension of concessions or other obligations takes the form of an increase in tariffs on selected products originating in the United States, based on the measures of the United States.” “India reserves its right to further suspend substantially equivalent concessions and other obligations based on the trade impact resulting from the application of the measures of the United States,” the notification added. U.S. President Donald Trump, in March, signed an order imposing a 25% tariff on steel imports and a 10% tariff on aluminium imports, citing national security as one of the key reasons behind the move. The Indian government repeatedly requested an exemption from these tariffs as India did not pose a security threat to the U.S., but to no avail. India has also taken the U.S. to the dispute settlement mechanism in the WTO over the matter. Surprising move The decision to begin retaliatory measures against the U.S., however, is particularly surprising because Commerce Minister Suresh Prabhu, on his return from the U.S. on Friday, indicated that the two countries would try to resolve their issues through dialogue. “If they wanted to take fresh action, they would not agree to talks and we would not either do the same,” Mr Prabhu told reporters on Friday. “Instead of measures and counter-measures, we decided to talk and resolve it out.” The notification to the WTO was, however, dated June 13, before the Minister made his comment. “The situation between the U.S. and India should not be viewed as a trade war just yet,” Rishi Shah, Economist at Centre for Digital Economy and Policy said. “A possible continuation of such steps from both sides may result in more friction on the trade front. However, it must be kept in mind that the last fortnight has seen ratcheting up of trade tensions in the West and also with China as the US has imposed tariffs. Given the less than optimal nature of such policies, it must be assessed how sustainable they may be.” $240 million in duty The removal of concessions on U.S. imports — on items such as chickpeas, lentils, almonds, apples and some metal products — will likely result in a duty collection of $240 million, according to the Centre. This, according to the government, was in keeping with the duty increase of $241 million due to the U.S.’ actions. “India wishes to clarify that suspension of concessions shall be equivalent to the amount of trade affected by the United States’ measures,” the notification said. “To this end, India reserves the right to adjust the specific products for which suspension of concessions is effectuated, and its right to adjust the additional rate of duty imposed on such products.” Notably, one of the items on which the import concessions have been dropped pertains to high-capacity motorcycles such as those manufactured by Harley Davidson, duties on which were one of the sore points mentioned by Mr. Trump about India’s tariff policy. “It’s some bit of posturing and some amount of negotiation will happen,” Abhishek Jain, Tax Partner at EY India said. “I don’t think it is as big as what is happening between the U.S. and China. Of course, this move will make these items more expensive for Indian importers.”