Trade friction: India set to take on US with $240 mn retaliatory levy

TARIFF BATTLE Proposed move seeks to counter US duty hikes on steel and aluminium imports from India

NEWDELHI:India is likely to introduce tariffs worth $240 million next week on a revised list of 30 imports from the United States in retaliation for a unilateral increase on duties imposed by Washington on Indian steel and aluminium, as a raft of disputes featuring the mercantilist administration of President Donald Trump at centrestage threaten to escalate.

India has notified to the World Trade Organization (WTO) the revised list including almonds, apples, phosphoric acid and motorcycles with engine capacity of more than 800 cc (including Harley Davidson motorbikes), on which it intends to impose retaliatory tariffs. On May 18, India had given the WTO a list of 20 items imported from the US worth $166 million on which it proposed to increase tariffs. In the revised list, India has lowered the proposed maximum additional duties from 100% (on walnuts) to 50% (on Harley Davidsons).

In Brussels, European Union countries on Thursday approved a raft of tariffs targeting US goods including whiskey, blue jeans and motorcycles in retaliation against duties imposed by Trump on European metals. The European countermeasures aimed at 2.8 billion euros ($3.3 billion) of American imports come after Trump on June 1 followed through on a threat to impose tariffs on European steel and aluminium exports. “Member states have today unanimously supported the commission’s plan for the adoption of rebalancing measures on the US tariffs on steel and aluminium,” a European Commission source said.

On Friday, Trump announced hefty tariffs on $50 billion of Chinese imports and Beijing threatened to respond with “equal scale, equal intensity.”

The US President pledged additional tariffs if China follows through on the threat to fight back. The 25% duties are a response to the US’s so-called Section 301 investigation earlier this year that accused China of stealing US intellectual property in an effort to dominate the development of advanced technology.

“The US can no longer tolerate losing our technology and intellectual property through unfair economic practices,” Trump said in the statement. China, the world’s No. 2 economy behind the US, has pledged to retaliate on US exports including soybeans and pork. The US imported $505 billion of goods from China last year and exported about $130 billion, leaving a 2017 trade deficit of $376 billion, according to US government figures.

The response from India, China and the EU to unilateral tariff movies by the Trump administration signals an escalation of their trade disputes. Trump, whose hardline stance on trade has seen him wrangle with allies, vowed further measures if Beijing struck back.

India had asked the US government to exempt it from its 25% levy on steel and 10% on aluminum imposed by Trump on grounds of national security. The US rejected the request by India, which has also dragged the US to the WTO dispute settlement mechanism over the matter. Asked whether the proposal to retaliate against the US is posturing by India ahead of the trade talks, a commerce ministry official said on condition of anonymity: “The US goes ahead and does its own thing. Why should India be posturing only? When talks happen, we can use it as a bargaining chip.”

Trade minister Suresh Prabhu said on Friday after a two-day US visit that the talks he had with American officials were held in a positive atmosphere and that trade negotiators from both sides would soon meet to resolvel pending issues.

Assistant US trade representative Mark Linscott is likely to visit India in the last week of June to negotiate a “trade package”, the official cited above said.

The package is likely to involve negotiations granting an extension to India on generalised system of preferences (GSP) that the US is currently reviewing. India exports about 3,500 items worth $5.6 billion to the US at zero or low duties. India in exchange may facilitate more US imports in items such as dairy products and Harley Davidson bikes.

Trump has often raised the issue of higher tariffs on Harley Davidson motorcycles imposed by India and threatened to slap reciprocal taxes on Indian bikes, which he has wrongly claimed India was selling “in thousands” in the US.

Addressing the press on the sidelines of the G7 summit in Canada’s Quebec City last week, Trump particularly named India, accusing it of charging 100% tariff on some US goods. “We’re like the piggybank that everybody is robbing,” Trump said.