Tariff Wars/Conflicts Part 3
By
Dr H A C Prasad
India’s Retaliatory Tariffs on the US
India was continuously engaging with the US on the US Tariffs on Steel and Aluminum imposed in March 2018. But the US did not accede to India’s request for withdrawal of these duties. After one year’s negotiations and multiple pauses, India imposed retaliatory tariffs on US with effect from June 2019 on 28 items. The main items in the list were Agricultural items like Almonds and Apples Fresh, Iron and Steel items and Chemicals. Agricultural items form 57.5 % of the imports of 28 items by India from US in 2018. As mentioned in our study for India Exim Bank, the average weighted tariff for import of 28 items by India using 2018 imports as weights worked out to 30.4 percent due to additional duty for the 28 items. The total import value of these items in 2018 as per our estimate was around $1.91 billion and formed 4.9 percent of the total imports of India from US.
Impact of India's Retaliatory Tariffs on Trade
US Exports to India data mirroring India’s imports from US shows that the growth of India’s imports from US of the 28 items (US exports to India of the 28 items) on which retaliatory tariffs were imposed fell in Q1 2019 and further in Q2 and Q3 2019. Though the value of imports of the 28 items by India on which retaliatory tariffs were imposed formed only 3.8% and 3.4% of the total imports of India from the US in 2018 and in the first 3 quarters of 2019 respectively, nevertheless they were important items including agricultural items, chemicals and Iron and Steel items. Besides the intention was also to send a message that US action will also face retaliation from India.
Inferences
Thus India-US Trade Conflict affected both countries. US even took India out of the developing countries’ list citing India’s share in World Trade as above 0.5% and on account of India being a G-20 member. As a result, India was no longer eligible for special preferences under the methodology for CVD investigations. This also made renegotiations on GSP difficult.
These historical developments need to be kept in mind while analysing the issue of Reciprocal Tariffs and all other tariff related issues under Trump 2.0
