India refused to seed to disproportional demands by the US and the US announced its decision on 4 March to withdraw GSP benefits for India by 1 May. (Reuters)
India refused to seed to disproportional demands by the US and the US announced its decision on 4 March to withdraw GSP benefits for India by 1 May. (Reuters)

As US delays withdrawing GSP benefits, India postpones retaliatory tariffs

  • India and the US may soon hold a bilateral meeting on the rising trade tensions between the two strategic partners
  • On 20 June last year, India notified that it will hike tariffs on 29 US products, including almonds, apples and phosphoric acid

New Delhi: India on Thursday further delayed implementation of its June 2018 order to impose retaliatory tariffs on 29 US products by 14 days till 16 May as it awaits a final word from the US on its decision to withdraw duty-free benefits to Indian exporters.

On 20 June, India notified that it will hike tariffs on imports of 29 US products, including almonds, apples and phosphoric acid, worth $10.6 billion in retaliation to the steel and aluminium tariff hikes by the US in March 2018.

The US also announced in April last year to review the eligibility criteria of India currently accessing generalised system of preferences (GSP) benefits of zero duty on $6.3 billion worth of India exports.

India did not impose the retaliatory tariffs immediately, unlike other major trading partners of the US, as the two countries began discussions for finalizing a trade package that would include a withdrawal of the GSP review.

However, the talks collapsed as India refused to cede to disproportional demands by the US. On 4 March, the US announced its decision to withdraw GSP benefits for India by 1 May. The decision needs to be effected through a presidential proclamation, which has not happened.

“Our decision is a signal that if the US notifies withdrawal of GSP benefits for India, we could impose the long pending retaliatory tariffs," a commerce ministry official said on condition of anonymity.

This also comes at a time when US commerce secretary Wilbur Ross is scheduled to visit India on 6 May to attend the Indo-Pacific focused business forum in New Delhi. During his visit, Ross is likely to hold a bilateral meeting with India’s commerce minister Suresh Prabhu on the rising trade tensions between the two strategic partners. India is however, unlikely to make any commitments for concessions until a new government takes charge after the ongoing general elections end this month.

Trump has often pointed to the bilateral trade surplus India enjoys, claiming that it prohibits US exports through higher tariffs. He has often raised the issue of higher tariffs imposed by India on Harley-Davidson motorcycles and has threatened to slap reciprocal taxes on Indian bikes.

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