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Last Updated : Mar 09, 2019 08:25 AM IST | Source:

Explained: India becomes Trump’s latest trade target

Watch the video to know what does the withdrawal of tariff concessions available to India under the Generalized System of Preferences means for both countries.

US president Donald Trump has announced plans to withdraw the tariff concessions available to India under the Generalized System of Preferences (GSP) that allows $5.6 billion worth of Indian exports to enter the US - duty free. So what does this means for both the countries and their trade relations?

President Trump says that India is not providing reasonable access to its markets and he has repeatedly called out India for its high tariffs in the past. Under GSP, as many as 1,900 Indian products from sectors such as chemicals and engineering equipment, leather, textiles, gold, building materials, dairy items, get duty free access to the US market

According to President Trump, trading partners are taking advantage of the US and this needs to be fixed. This is also the prime reason for the current trade tensions between the US and China, so India is no different. India is the world's largest beneficiary of the GSP programme and ending its participation could be seen as the strongest punitive action against India since Trump took office in 2017.


According to the USA, higher tariffs on exports under GSP will kick in after 60 days after notifications are sent to Congress and the Indian government.

But the Indian government believes this will have a limited impact. Commerce Secretary Anup Wadhawan said that it will not have a significant impact on India's exports to the US. The Federation of Indian Export Organisations is also of the same opinion. The tariff impact will be to the tune of $190 million annually for India. Some experts believe, the goods exported through GSP also included items produced by small and medium enterprises, so it could affect employment in the sector.

So what does the US want and what will India next?

The US wants lower duties on its exports to India, including a zero duty on Harley Davidson motorcycles. It wants prices caps on medical devices such as stents and knee implants to be removed. The USA also wants India to remove barriers on imports of dairy products.

On a further course of action, the commerce secretary has said issues remained open for discussion in the future as nothing goes off the table. He has also for now rejected the need for any knee-jerk reactions and retaliatory actions. Experts suggest that India also has an option to approach the WTO dispute body, to deal with the US decision. However, bilateral talks would be ideal to resolve issues.


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First Published on Mar 9, 2019 07:57 am
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