India hits back at Donald Trump by imposing tariffs on 30 items and ups the ante with the USA escalating trade tensions between the two countries

Screen Shot 2018-06-17 at 3.59.28 AM.pngIn what could signal escalating trade tensions between New Delhi and Washington, the Centre has written to the World Trade Organisation (WTO) notifying its decision to increase import tariffs on 30 items from the U.S. amounting to $240 million, in retaliation against tariffs imposed by the latter on aluminium and steel imports.

the notification to the WTO says “India hereby reiterates its decision to suspend concessions or other obligations notified to the Council for Trade in Goods on 18 May 2018… that are substantially equivalent to the amount of trade affected by the measures imposed by the United States,” the Centre said in the notification to the WTO’s Council for Trade in Goods. “The proposed suspension of concessions or other obligations takes the form of an increase in tariffs on selected products originating in the United States, based on the measures of the United States.” the notification further added that “India reserves its right to further suspend substantially equivalent concessions and other obligations based on the trade impact resulting from the application of the measures of the United States,”

U.S. President Donald Trump, in March, signed an order imposing a 25% tariff on steel imports and a 10% tariff on aluminium imports, citing national security as one of the key reasons behind the move. The Indian government repeatedly requested an exemption from these tariffs as India did not pose a security threat to the U.S., but to no avail. India has also taken the U.S. to the dispute settlement mechanism in the WTO over the matter.

The removal of concessions on U.S. imports — on items such as chickpeas, lentils, almonds, apples and some metal products — will likely result in a duty collection of $240 million, according to the Centre. This, according to the government, was in keeping with the duty increase of $241 million due to the U.S.’ actions. Notably, one of the items on which the import concessions have been dropped pertains to high-capacity motorcycles such as those manufactured by Harley Davidson, duties on which were one of the sore points mentioned by Mr Trump about India’s tariff policy.

It is obviously not as big as what is happening between USA and China but of course, this move will make things more expensive for Indian importers. The situation between the U.S. and India should not be viewed as a trade war just yet. A possible continuation of such steps from both sides may result in more friction on the trade front. However, it must be kept in mind that the last fortnight has seen ratcheting up of trade tensions in the West and also with China as the US has imposed tariffs. Given the less than optimal nature of such policies, it must be assessed how sustainable they may be.

Washington’s action against Chinese imports Friday, and the expected response from Beijing are hurting some U.S. industries more than others. President Donald Trump’s tariffs on $50 billion in Chinese imports include duties on components for wind turbines, nuclear reactors and batteries — but they are unlikely to cripple any of those industries.

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