India to increase tariffs some US goods to counter GSP exit

Published 15.06.2019 12:47

India has decided to raise tariffs on imports of 29 goods from the U.S. after having deferred the move several times since announcing it last year.

The government had said last June it would raise import taxes as high as 120% on a slew of U.S. goods including almonds, walnuts and apples, apparently irked by Washington's refusal to exempt New Delhi from higher steel and aluminum tariffs.

But it delayed raising tariffs several times as trade talks between the world's two biggest democracies raised hopes of a resolution.

However President Donald Trump's decision to strip New Delhi of its preferential trade status under the Generalized System of Preferences (GSP) on June 5 appears to have triggered the latest Indian move.

There would be no further delays in imposing the retaliatory tariffs, the Economic Times reported, quoting a government official, with the new taxes due to take effect from Sunday.

The Press Trust of India news agency said the finance ministry would make a formal announcement soon, although it had already conveyed its decision to the United States.

India is now looking at adopting the higher tariffs, the sources with direct knowledge of the matter told Reuters, although the U.S. has warned that any retaliatory tariffs by India would not be "appropriate" under WTO rules.

"What India is doing is legal and the tariffs on U.S. goods will only lead to an impact of around $220 million," one of the sources said, declining to be identified because of the sensitivity of the matter.

India's Ministry of Commerce and Industry did not respond to an email from Reuters to seek comments.

India is by far the largest buyer of U.S. almonds, paying $543 million for more than half of U.S. almond exports in 2018, U.S. Department of Agriculture data shows. It is the second largest buyer of U.S. apples, taking $156 million worth in 2018.

The trade tensions come despite Washington's effort to boost ties with India as a counterweight to China and Trump's stated good relations with Prime Minister Narendra Modi.

Trump and Modi are set to meet at the G20 summit on June 28-29 in Osaka where the sticky trade issue is likely to be taken up.

It is also likely to figure during talks with U.S. Secretary of State Mike Pompeo who is set to visit India for talks later this month.

On Wednesday Pompeo had said the U.S. was open to dialogue with India and would "broach some tough topics."

"We remain open to dialogue, and hope that our friends in India will drop their trade barriers and trust in the competitiveness of their own companies," Pompeo had said.

U.S. goods and services trade with India stood at an estimated $142.1 billion in 2018. The U.S. trade deficit with India was $24.2 billion, according to official data.

Trump has repeatedly called out India for its high tariffs, even though the two countries have developed close political and security ties.

New Delhi's new rules in areas such as e-commerce and data localization have angered the United States and hit companies such as, Walmart Inc, Mastercard and Visa, among others.

Previously, India has called the withdrawal of GSP benefits "unfortunate", and vowed to "always uphold its national interest in these matters."

The GSP program, introduced in 1976, is aimed at promoting economic growth in developing countries and allows designated countries to export some 2,000 industrial and textile products to the U.S. duty-free. India was the biggest beneficiary of the scheme that allowed duty-free exports of up to $5.6 billion from the country. Turkey, ranking fifth with an estimated $1.66 billion in applicable imports, was another country stripped of GSP privileges.

India's Commerce Minister Piyush Goyal, however, minimized the effects of the change after a Board of Trade meeting on June 7: "It has had an impact on some sectors, some places ... 1 percent, 2 percent ... India is no more an underdeveloped or least developed country that we will look at that kind of support."

Washington is already engaged in a full-blown trade war with India's regional rival China.

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