India Considers Retaliatory Tariffs on US Goods Amid Ongoing Trade Tensions
India’s decision to impose retaliatory import duties on select U.S. goods in response to American tariffs on steel and aluminum has raised concerns about the future of trade negotiations between the two nations. The Global Trade Research Initiative (GTRI) highlighted that this move could complicate ongoing discussions for a broader trade agreement. If the U.S. does not engage in consultations or withdraw the tariffs, India is expected to implement these retaliatory measures by early June, potentially escalating trade tensions and affecting U.S. exporters.
Retaliatory Tariffs and WTO Notification
India has formally notified the World Trade Organization (WTO) of its intention to suspend certain trade concessions previously granted to the U.S. This action is a direct response to the safeguard duties imposed by the U.S. on Indian steel, aluminum, and related products since 2018, which were justified by Washington on national security grounds. The suspension of these concessions could lead to increased tariffs on unspecified U.S. products. In 2019, India had already imposed retaliatory tariffs on 28 U.S. goods, including almonds, apples, and chemicals, indicating a precedent for such actions.
The GTRI’s founder, Ajay Srivastava, noted that India’s latest move comes at a critical juncture in U.S.-India relations. Both countries are currently exploring a broader free trade agreement, and India’s retaliation could hinder these negotiations. The situation underscores India’s firm stance on strategically important sectors like steel and aluminum, which align with its ‘Make in India’ initiative aimed at boosting domestic manufacturing.
Impact of U.S. Tariffs and India’s Response
The ongoing dispute centers around U.S. safeguard tariffs on steel and aluminum imports, which were initially implemented in 2018 and have been renewed multiple times. The most recent extension was enacted through U.S. Presidential Proclamations effective from March 12, 2023. India argues that these measures, while not formally labeled as safeguard actions, effectively function as such and violate WTO regulations. The country contends that the U.S. did not conduct mandatory consultations as required under Article 12.3 of the WTO’s Agreement on Safeguards, prompting India to assert its right to retaliate.
India’s latest notice to the WTO, dated May 12, invokes its right to respond to safeguard measures imposed without proper consultation. The Indian government aims to recover approximately USD 1.91 billion through these retaliatory duties, reflecting the additional tariffs collected by the U.S. on Indian exports valued at USD 7.6 billion. The outcome of this dispute largely hinges on the U.S. response to India’s actions.
Historical Context and Future Negotiations
India has a history of engaging in safeguard retaliation. Following the U.S. decision to remove India from its Generalized System of Preferences (GSP) program and maintain tariffs on steel and aluminum, India implemented increased duties on 28 American products in June 2019. This initial retaliation affected trade valued at approximately USD 240 million. However, these duties were lifted in September 2023 after a state visit by Prime Minister Narendra Modi to Washington, where both nations agreed to resolve six active WTO disputes, including this one.
Currently, India and the U.S. are in the process of negotiating a bilateral trade agreement. An Indian delegation is expected to visit the U.S. this week to continue discussions. The outcome of these negotiations will be crucial in determining the future of trade relations between the two countries, especially in light of the recent tensions surrounding tariffs and retaliatory measures.
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