Prime Minister Narendra Modi and US President Donald Trump during the former's White House visit in June 2017. Trade negotiations between the countries have collapsed.

India weighs retaliatory tariffs on US imports worth $10.6 billion

  • The move comes after US decided to scrap duty benefits on $5.6 billion worth of India exports by May
  • India hopes to find a solution to the trade tiff in 60 days before US tariffs come into effect

New Delhi: India is likely to impose retaliatory tariffs on $10.6 billion worth of goods imported from the US, after the Trump administration decided to scrap duty benefits on $5.6 billion worth of exports from India by May, following the collapse of trade negotiations.

In June 2018, India had decided to levy higher tariffs on products such as almonds, apples and phosphoric acid in retaliation to the US unilaterally raising customs duties on certain steel and aluminium products. However, India deferred implementation of the decision as talks were going on between the two sides for a trade package.

The next deadline for the tariffs to kick in is 1 April.

The US is likely to withdraw duty benefits under the generalized system of preferences (GSP) amounting to $190 million on $5.6 billion of exports from India.

“We are weighing all our options. The retaliatory tariffs may kick in either after the current deadline ends or before that. We are reserving our right to drag the US to the WTO (World Trade Organization) as the GSP (generalized system of preferences) withdrawal violates the principle of non-discrimination," an Indian commerce ministry official said, on condition of anonymity.

The GSP programme allows duty-free entry of around 1,900 products from India into the US, benefiting exporters of textiles, engineering, gems and jewellery and chemical products. The United States Trade Representative (USTR) in April last year announced that it was reviewing India’s GSP eligibility on the request of the US dairy and medical devices industries, given India’s alleged trade barriers affecting US exports in these sectors.

During the recently concluded Trade Policy Forum talks, US commerce secretary Wilbur Ross had also raised concerns regarding new trade barriers created by India.

“India has implemented a wide array of trade barriers that create serious negative effects on United States commerce. Despite intensive engagement, India has failed to take the necessary steps to meet the GSP criterion," the office of USTR said in a statement late on Monday.

Also read: Donald Trump plans to end India's preferential trade status

During the recently concluded Trade Policy Forum talks, US commerce secretary Wilbur Ross had also raised concerns regarding new trade barriers created by India, hinting at the stringent e-commerce rules that have affected US companies, including Amazon.com Inc. and Flipkart owner Walmart Inc.

India’s commerce secretary, Anup Wadhawan, in a hurriedly-called press briefing, said that disproportionate demands from the US led to the collapse of talks, although India was ready to offer the US greater market access in agricultural products.

Wadhawan said the US brought new issues to the negotiating table, apart from medical devices and dairy products on a “self-initiated basis".

These include issues related to market access for various agriculture, animal husbandry and, information and communications technology products, including mobile phones.

“India was able to offer a very meaningful way forward on almost all the US requests. In a few instances, specific US requests were not found reasonable and doable at this time by the departments concerned, in light of public welfare concerns reflective of India’s developing country status and its national interest," Wadhawan said.

The official cited earlier said the US demanded reversal of the price caps on coronary stents and knee transplants immediately under a new trade margins regime, which India could not agree to, given the public interest involved at a time of impending general elections.

Also read: Why markets should pay attention to the latest India-US trade spat

Wadhawan said the impact of the US action on India’s exports will not be very significant as the duty benefits are worth only $190 million on exports worth $5.6 billion.

Sachin Chaturvedi, director general at Research and Information System for Developing Countries (RIS), said India must prepare to take a firm stance against the US.

“We have been soft on the US. All undue concessions should be done away with and (the pending) retaliatory tariffs should be announced soon," he added.

Also read: Opinion | A bumpy road ahead for India-US trade relations

An official in the ministry of external affairs said on condition of anonymity that India would continue to work with the US to find a solution as there are 60 days left.

“We have been pointing out to them that US exports to India have gone up by 30% in the past year and this has come in a globally depressed market. Oil and gas imports from the US are increasing," he added.

Also read: Opinion | We must resist Trump’s myopic view of trade

Former trade secretary Rajeev Kher said India should not subordinate its policymaking to a third country. “The US can’t bully us into adopting an e-commerce policy, which is contrary to our interest, if that is the objective. Our exporters need to be more competitive in any case," he added.

Mint's Elizabeth Roche in New Delhi contributed to this story.