Donald Trump threatens India, China with reciprocal tax
India reacted cautiously to the reciprocal tax threat while stating that commitments by the US and India to WTO differ since India is a developing country and hence enjoys more flexibilities
New Delhi: US President Donald Trump on Friday threatened to impose higher tariffs on countries like India and China if they did not match his country’s tariffs on similar items.
Trump made these comments while announcing his decision to impose import tariffs of 25% and 10% on steel and aluminium, respectively, on all countries except Canada and Mexico with whom the US is renegotiating the North American Free Trade Agreement. The contentious tariffs that have invited sharp global condemnation, will take effect in the next 15 days.
“We’re going to be doing a reciprocal tax programme, at some point so that if China is going to charge us 25% or if India is going to charge us 75% and we charge them nothing. If they are at 50, or they are at 75 or they are at 25, we are going be at the same number. It’s called a reciprocal tax, mirror tax. So they charge us 50, we charge them 50... We are going to be doing a lot of that,” he added.
India reacted cautiously to the threat while stating that commitments by the US and India to the World Trade Organization (WTO) differ since the former is a developed country while the latter is a developing country, and hence enjoys more flexibilities.
Commerce secretary Rita Teaotia said that though India’s exports of steel and aluminium to the US are limited at present, the tariffs concern India as a matter of principle. “Let’s wait and see the manner in which it is notified and then we will decide what is to be done. No country violates its WTO commitments. What the US is using is a security excuse. We have to see in what form they are able to justify and rationalize it,” she added.
India, the world’s 14th-largest steel exporter, exported iron and steel worth $320 million and aluminium worth $350 million to the US in 2016-17. The US ranked seventh as a destination for India’s steel exports, accounting for just 5% of exports.
India’s ambassador to the WTO, J.S. Deepak, explained that there is an outcry against the US for raising duties on two items but not against India for raising duties on 40 items in this year’s Union Budget because India has raised them within the ceiling rates committed to WTO.
“Outcry against the US is because they have gone well above their bound rates, which is against WTO rules. And their favouring one nation or the other is discrimination and against the most favoured nation commitment to WTO members,” he added.
The Trump administration has time and again insisted that India is resorting to discriminatory trade practices, which have led to a large trade deficit for the US. Last week, Trump criticized India for imposing high import duty on the iconic Harley-Davidson motorcycles and threatened to increase import tariff on “thousands and thousands” of Indian motorcycles to the US.
During a recent discussion with members of Congress, Trump said the decision of the Indian government to reduce the tariff on Harley-Davidson motorcycles from 75% to 50% was not enough and asked that it should be reciprocal, as the US imposes “zero tax” on the import of Indian motorcycles.
Teaotia said India has a Make In India programme and it needs to calibrate its policy accordingly, without further elaborating on the Harley-Davidson issue.
Indian officials requesting anonymity said the tariff hike by the US administration may face strong criticism at the upcoming mini-ministerial organized by India in New Delhi on 19-20 March. While 40 of the 53 countries invited to the event have confirmed their participation at either a political or official level, three have rejected the offer. The US will be represented at the deputy US trade representative level while China will be represented by its vice minister of commerce Wang Shouwen.
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