Why in News?
India has decided to impose retaliatory tariffs on 29 goods imported from the U.S., from June 16, 2019 onwards.
What necessitated this decision?
- The tariffs on the 29 goods, including walnuts, apples, and some pulses, were initially announced in June 2018.
- This came as retaliation to U.S. President Trump’s decision in March, 2018 to impose higher import tariffs on Indian aluminium and steel.
- India has repeatedly asked for exemption from these higher tariffs, but it was not effected.
- However, negotiations continued for about a year, and India repeatedly extended the deadline for retaliatory tariff imposition.
- Another issue is over granting India duty-free imports for certain items under the U.S.’ Generalised System of Preferences (GSP).
- The talks over this too has not brought any favourable outcomes.
- Also, under a U.S. ultimatum, India had to terminate its imports of vital crude oil from Iran.
What are the likely implications?
- If implemented, 29 items imported from the US will face higher duties, cutting benefits to U.S. exporters.
- The tariffs will place a burden of $220-290 million on the U.S.
- Notably, this is about the same amount imposed by U.S. on India in 2018 on steel and aluminium.
- For India, given the robust market and sound economic fundamentals, it may not bring in any untoward effects.
- Moreover, the imposition of increased import tariffs on agricultural commodities will help domestic farmers.
- The withdrawal of GSP will not make much difference either, as Indian exports are all geared to take this challenge.
What is the way forward?
- The decision indicates that India is, at least for now, done with a more conciliatory stance with the U.S.
- The counter-tariffs have now lent the Indian side a bargaining chip.
- However, India has much at stake in ensuring that economic ties with its largest trading partner continue.
- This should not end as a result of timely irritants due to the current U.S. administration’s unconventional approach to trade and tariffs.
- So, the Indian government has to review with flexibility some of its decisions.
- These include the data localisation requirements and the new e-commerce regulations that have become concerns for the U.S. side.
- On the other hand, India has to convey its U.S. counterparts the importance of market access for Indian services exporters being free of new, restrictive visa curbs.
Source: The Hindu
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