After China and the EU, India the next target for Trump’s War on Trade

US  President Donald Trump has announced plans to scrap preferential trade treatment for India, claiming that New Delhi has failed to assure the US of “equitable and reasonable” access to its markets.

“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,” US Trade Representative Robert Lighthizer said in a press release.

The preferential trade treatment with the US allows duty-free entry of about 2,000 products, including auto components, industrial valves, and textile materials.

Trump’s decision comes at a sensitive moment for India as it is less than two months away from Lok Sabha Elections 2019. Photo courtesy: Wikimedia

The move to end the Generalised System of Preferences (GSP) for India and Turkey is the latest push by Trump to redress what he considers to be unfair trading relationships with other countries like China.

The US accounts for 15 per cent of India’s exports, with goods worth $48 billion shipped to them. India’s total export to the U.S. under the special status was worth $5.7 billion in 2017. The rollback, however, will affect only 12 per cent of these exports. That translates to just 2 per cent of total exports getting impacted, or up to 0.2 per cent of India’s GDP, according to Nomura.

Trump’s decision comes at a sensitive moment for India as it is less than two months away from Lok Sabha Elections 2019. India is also consumed by growing tensions with neighbour Pakistan after the dastardly Pulwama attack.

“Due to various initiatives resulting in the enhanced purchase of US goods like oil, natural gas and coal the US trade deficit with India has substantially reduced in calendar years 2017 and 2018,” said the Indian Ministry of Commerce and Industry in a statement.

Recently, the Indian government, on the other hand, extended the deadline for retaliatory customs duties on 29 US products till April 1. Originally set to go live from June 28, 2018, the tariffs have been repeatedly postponed by the government.

After Trump’s move, if India goes ahead with retaliatory tariffs, 29 items imported from the US, including walnuts, lentils, boric acid and diagnostic reagents among others will face higher duties, cutting benefits to the US exporters. The move will put an extra burden to the tune of USD290 million per year on US items exported to India.