NEW DELHI: New Delhi on Thursday countered US President Donald Trump’s allegations of India being a “tariff king" by highlighting that the US itself charges high tariffs on several items, including tobacco, peanuts, and footwear.
India is one of the highest taxing nations in the world, Trump had said at the National Republican Congressional Committee Annual Spring Dinner earlier this month. “They charge us 100% tariffs on goods. So, they send a motorcycle—and they make a lot of them—Indian cycles. They send them to our country. We charge them nothing. We send a Harley Davidson to India and they charge us 100%. Not fair, okay. Not reciprocal. It’s not fair," Trump had said, misrepresenting India’s current tariff rates on premium bikes. Trump’s repeated tirades against high Indian tariffs on premium bikes had forced India to reduce the duty on completely built units from 75% to 50% last year.
Most countries have a reason for charging high tariffs on a few items, said a senior commerce ministry official on condition of anonymity. “Japan may like to protect its rice farmers, the US its tobacco farmers, and India its growing wine industry. High tariff items do not represent the tariffs at which actual trade happens for most items. Average tariff and weighted tariff better represent a country’s tariff profile," the official said.
The counter to Trump’s allegation by Indian officials holds significance as the US is set to formally withdraw zero duty benefits under the generalized system of preferences (GSP) to India from 4 May, even as India has once again deferred to 2 May its previously announced retaliatory tariffs against an unilateral hike in steel and aluminium duties by the US government. India fears that implementing the retaliatory tariffs may be viewed by the US as a counter to the withdrawal of GSP benefits.
India imposes high duties on several items such as whiskey and wines (150%), automobiles (60-100%), mango juices (50%), and marble blocks (40%).
The highest tariffs imposed by Japan (736%), South Korea (807%), the US (350%), and Australia (163%) are much higher than that of India (150%), the commerce ministry official said quoting the World Tariff Profiles 2018, published by the World Trade Organization (WTO).
India’s average tariff at 13.8%, maybe higher than that of the US’s 3.4%, but is almost at par with South Korea’s (13.7%).
“Trump should have talked about the prevailing average tariffs. However, that would not have much news value because of the low number. The ‘tariff king’ label for India does not stick as most countries, including the US, levy higher duties on some products," the official added.
“On the average, India’s tariff levels are significantly below our bound rates and are comparable to the tariffs of the most open developing countries and even some developed ones," he said.
India’s applied tariffs are within the bound rates agreed to by all WTO members, which vary for developed and developing nations. Developing countries enjoy longer phase-out periods and higher bound rates of tariffs, a concession they received in return for ceding ground on intellectual property rights and services to the developed countries when WTO rules were formulated.