India strikes back with tariffs on U.S.
Bloomberg News
Global trade tensions deepened Thursday with China intensifying its rhetoric and reiterating it will hit back if the latest tariff threats from President Donald Trump materialize, while India followed the European Union in slapping retaliatory levies on U.S. goods.
China is “fully prepared” to respond to any new list of U.S. tariffs, according to a commerce ministry spokesman, who said the nation will use a combination of quantitative and qualitative measures. Mr. Trump on Mondayevening ordered up identification of $200 billion in Chinese imports for additional tariffs of 10 percent — with another $200 billion after that if Beijing retaliates. He’s already promised to place tariffs of 25 percent on $50 billion, starting July 6 with an initial $34 billion worth of imports.
Echoing steps taken by China, the European Union and other trading partners, India raised tariffs on a slew of items in retaliation for the U.S. imposing higher levies on some products shipped from the South Asian nation. The import duty on chickpeas and Bengal gram, or chana, has been increased to 70 percent and will take effect from Aug. 4. The tariffs have also been raised on other items including walnuts, almonds, boric acid, apples, diagnostic reagents and some hot-rolled coil products.
Prime Minister Narendra Modi’s administration’s tit-for-tat move comes amid allegations that Mr. Trump’s 25 percent and 10 percent duties on steel and aluminum, respectively, violate the global trading rules and have hurt its exports. India’s trade surplus — merchandise and services — with the U.S. stood at $28 billion in 2017, marginally lower than the $30.8 billion in 2016.
The U.S. cited that as one of the reasons for naming India a potential currency manipulator. And it has complained to the World Trade Organization that India’s export subsidies are hurting American companies.
Economists noted that the amount of money involved with India’s levies dwarfed in comparison with that of China — U.S.India trade was $126 billion last year, while U.S.-China trade was $635 billion — but that the gesture had important symbolism and could forecast further strain between the two friendly democracies at time when its diplomats are working to deepen military ties.
With its move, India is simply “returning the favor,” said Gautam Chikermane, a researcher on international and Indian economic policy at the Observer Research Foundation in New Delhi. But, he said, the move could hurt India’s economic growth as the country diversifies its exports, as well as prompt India “to re-look at U.S. relations as undependable.” That could push India closer to Southeast Asia and the European Union, further isolating the United States, he argued.
“The increase in tariffs is a message to the U.S. administration to take concerns of other nations seriously,” said Sachin Chaturvedi, director general at New Delhibased think tank Research and Information System for Developing Countries. “Now this is unlikely to remain confined to a tariff war and will escalate to nontariff measures as well.”
U.S. Commerce Secretary Wilbur Ross on Thursday defended Mr. Trump’s decision to unleash tariffs on its trading partners, saying they’re necessary to ensure reciprocity.
“We’re trying to defend ourselves against their bad practice; they’re screaming and yelling - they’ve been spoiled for many, many years and that game is over,” Mr. Ross said in an interview on Bloomberg Television. “We’re going to fix the problem of protectionism around the world and we’re going to fix it by making it more painful for those countries to do bad practices than to do the right thing, which is to lower the trade barriers and lower their tariffs.”
The benchmark Chinese stock index sank 1.4 percent on Thursday, falling for fifth day out of the last six, and other emerging markets also declined, while the dollar strengthened. The main European equity gauge, already under pressure in the wake of Daimler’s cut to its profit outlook, headed lower and futures on the S&P followed suit.
“If protectionism cements its role in one or two big nations, we will see massive reallocation of resources in an inefficient way,” said Raymond Yeung, chief greater China economist for Australia & New Zealand Banking Group Ltd. in Hong Kong. “World growth will be affected.”
The world’s most-powerful central bankers this week warned that escalating international trade tensions have started damaging confidence among companies, threatening the global economic expansion.