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Last Updated : Feb 24, 2020 01:08 PM IST | Source: Moneycontrol.com

Trump's India visit: India, US relations - a tale of troubled tariffs

India is one of the largest importers of almonds from the US, having imported fresh or dried shelled almonds worth $615.12 million in 2018-19

Prime Minister Narendra Modi and US President Donald Trump (Image-News18 Creative)
Prime Minister Narendra Modi and US President Donald Trump (Image-News18 Creative)

US President Donald Trump's maiden visit to India February 24 comes at the backdrop of sticky trade relationships and failure of both the countries to finalise a comprehensive trade deal.

Soon after being elected to office, in March 2017, US President Donald Trump undertook a review of US' trade deficits and looked into violations of trade laws that went against US interests.

The US has a trade deficit of over $21 billion with India in 2017-18 and India was among those countries that exported more to the US than it imported.

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Thus began India's choppy trade relations with the US. The US administration, since, has been vocal in its criticism of India's 'unfair' trade practices.

Tariffs and fallout

Trump has, on a number of occasions, cornered New Delhi on tariffs, and has said that they were too high.

India has been negotiating a trade deal with the US since 2018. However, disagreements over tariffs, subsidies, intellectual property, data protection, and access to agricultural and dairy produce are some of the key sticking points that have led to the deal not getting inked till date.

The office of the US Trade Representative (USTR) has pointed out that India's laws preventing companies from sharing personal data of Indian citizens outside the country as restrictive to digital trade.

The US has been pressing India to have stronger patent regulations and the country should make it easier for US companies to invest in India.

In July last year, India slapped additional customs duties on as many as 28 products, including almonds, walnuts, fresh apples, and pulses.

India is one of the largest importers of almonds from the US, having imported fresh or dried shelled almonds worth $615.12 million in 2018-19. Imports of fresh apples from the US stood at $145.20 million, of phosphoric acid at $155.48 million, and of diagnostic reagents at nearly $145 million in the same year.

War of duties

Higher tariffs slapped on US imports were preceded by the US imposing additional tariffs on steel and aluminium. In 2018, the US slapped 25 percent additional tariff on steel and 10 percent on aluminium imports from countries including India.

The move brought down the US' share in India’s steel exports to 2.5 percent in 2018-19 from 3.3 percent in 2017-18. The decision was challenged by India at the World Trade Organization (WTO). This was followed by India imposing retaliatory tariffs after the US removed India from a scheme of preferential access to the US market.

Trump had accused India of being a 'tariff king' that imposes 'tremendously high' import duties. The US President has particularly been scathing in his attack on India's duties on the US motorcycle maker Harley-Davidson. In 2018, India halved the duty on the bike-maker to 50 percent but the US has still called it unacceptable.

GSP withdrawal

The final nail in the coffin of India-US relations came after the US decided to scrap India's benefits under the Generalised System of Preferences (GSP) scheme. The scheme allowed India preferential and duty-free access to over $6 billion worth of products exported to the US.

The US accused India of denying similar equitable access to US products into Indian markets, like the decision to slash maximum retail prices of life-saving cardiac stents and essential knee implants by 65 percent-80 percent.

The US also called out India's decision to put tariffs on information and communication technology products. The US also objected to India's demand that exporters of dairy products certify their produce was derived from animals and not fed food containing internal organs.

India has been trying to negotiate with the US to restore the GSP benefits. The USTR, however, classified India as a “developed” country based on certain metrics, making it unclear whether the upgrade from developing will impact the restoration of benefits under the GSP scheme.

Trade experts say, that though it is unlikely that India and the US would be able to sign a trade deal during the US President's visit, both the countries need to take small steps at a time and begin by showing meaningful gestures to indicate their willingness on future cooperation.

India could agree on doing away with higher tariffs on motorcycles and the US could reinstate GSP benefits, experts say.

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First Published on Feb 24, 2020 01:08 pm
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