Trump's trade attack pushes India to the negotiating table

US President Donald Trump's move ends trade concession to US$5.7 billion (S$7.8 billion) of goods that India shipped to the US as of 2017.
US President Donald Trump's move ends trade concession to US$5.7 billion (S$7.8 billion) of goods that India shipped to the US as of 2017.PHOTO: AFP

NEW DELHI (BLOOMBERG) - India plans to return to the negotiating table after President Donald Trump terminated a trade concession, which allowed the country to export almost 2,000 products to the US duty-free, people with knowledge of the matter said.

While an option is to raise tariffs on a slew of US goods as retaliation, India might not choose that considering the benefits withdrawn by Trump were not mandated by any global pact and were offered voluntarily by Washington, said the people who asked not to be identified, as they aren't authorised to speak to the media. Any counter tariff measures could fall foul of World Trade Organization norms.

The matter would be discussed when Piyush Goyal, India's new trade minister, meets local officials and trade bodies on June 6, the people said. India's commerce ministry spokesman Monideepa Mukherjee declined to comment.

India last year announced higher tariffs on a clutch of items in retaliation to US imposing higher levies on some products shipped from the South Asian nation, mirroring steps taken by China and the European Union. New Delhi, however, repeatedly deferred imposition of the new tariffs as it kept the door open for talks to avert a trade war.

Trump's move ends trade concession to US$5.7 billion (S$7.8 billion) of goods that India shipped to the US as of 2017. These include imitation jewellery, leather goods, pharmaceuticals, chemical and plastics and some farm items. The US has separately called for India to remove what Commerce Secretary Wilbur Ross last month described as "unfavourable treatment" to US companies and an imbalance in India-U.S. trade.

India's inability to ratchet up the trade dispute stems from its increasing reliance on the US for defence equipment purchases as part of a strategic partnership. The US has been spearheading a grouping of nations including India, Australia and Japan as part of its policy to contain China's growing economic and military might in Asia.

"Given the rising tempo of US-India strategic ties on matters chiefly pertaining to defence interoperability, India may take a tempered approach," said Kashish Parpiani, fellow at Observer Research Foundation, a private think-tank. The US's arms exports to India rose by over 550 per cent in the five years to 2017, making it India's second-largest arms supplier, Parpiani said.

 

India, which on its part tried to reduce the US$21 billion trade surplus with the US by stepping up imports from America, termed the withdrawal of benefits as "unfortunate".

While the country will continue to work on improving ties with the US, its trade decisions would be guided by its own "development imperatives and concerns", India's trade ministry said in a statement last week.