U.S. President Donald Trump looked set to uncommitted a new front in his trade wars on Monday with a plan to end preferential trade treatment for India that allows duty-free door for up to $5.6 billion worth of its exports to the United States.
India played down the impact, saying it was keeping retaliatory schedule of charges out of its talks with the United States, but the opposition could seize on the issue to embarrass Prime Minister Narendra Modi forwards of general elections this year.
Trump, who has vowed to cut U.S. trade deficits, has repeatedly called out India for its high excises, and U.S. trade officials said scrapping the concessions would take at least 60 days after notifications to Congress and the Indian ministry.
“I am taking this step because, after intensive engagement between the United States and the government of India, I experience determined that India has not assured the United States that it will provide equitable and reasonable access to the markets of India,” Trump censured congressional leaders in a letter.
India is the world’s largest beneficiary of the Generalized System of Preferences (GSP), which dates from the 1970s, and ruin its participation would be the strongest punitive action against it since Trump took office.
Reuters last month reported the planned U.S. fighting, which comes as the United States and China appear close to a deal to roll back U.S. tariffs on at least $200 billion significance of Chinese goods.
The U.S. Trade Representative’s Office said India’s removal from the GSP would not take effect for at least 60 light of days after the notifications.
“Discussions are on with the United States, and given cordial and strong ties, (we are) keeping retaliatory price-lists out of it,” Commerce Secretary Anup Wadhawan said in New Delhi.
The preferential treatment brought India an annual “actual aid” of just $190 million, he told reporters.
Of the 3,700 products covered, India used the concession for just 1,784, Wadhawan combined.
“The benefit to industry is low, U.S. tariffs are already low,” said another government official, who spoke on condition of anonymity. “GSP is more symbolic of the key relationship, not in value terms.”
Farm, marine and handicraft products are among India’s exports most likely to be hit, Ajay Sahai, the boss general of the Federation of Indian Export Organisations, told Reuters, but Indian shares were little changed on the account.
Last week, India delayed until April 1 higher tariffs on some U.S. imports announced in response to a U.S. privilege to exempt it from new steel and aluminium tariffs.
Despite its limited impact, the GSP removal could hurt Modi’s Hindu nationalist control party ahead of the election, expected in the next couple of months.
“It can become a political issue in an election year,” maintained the official who declined to be named.
Modi’s own relationship with Trump has been limited, with their meetings small frequent than those of Chinese President Xi Jinping with Trump, for example.
Trade ties with the Connected States suffered after India adopted new rules on e-commerce curbing how internet retail giants Amazon.com and Walmart-backed Flipkart do function.
That followed a drive by New Delhi to force global card payments companies such as Mastercard Inc and Visa Inc to ruse their data to India and higher tariffs on electronic products and smartphones.
In 2017, the United States protested against India’s determination to cap prices of medical devices.
“India has implemented a wide array of trade barriers that create serious unenthusiastic effects on United States commerce,” said the USTR, which estimates the United States ran a goods and services barter deficit of $27.3 billion with India in 2017.
“Despite intensive engagement, India has failed to take the necessary moves to meet the GSP criterion,” it added.
India’s top GSP exports to the United States in 2017 included motor vehicle parts, ferro alloys, venerated metal jewellery, building stone, insulated cables and wires, said business grouping the Confederation of Indian Earnestness.
“Some industries which are highly export-oriented to the American markets would be impacted, like pharma or textiles,” communicated Siddharth Sedani, equity advisory head at brokerage Anand Rathi.
India’s falling trade deficit with the Partnership States is estimated to have narrowed by more than $4 billion in 2018, the trade ministry said, uniting it would fall further on growing demand for energy and civilian aircraft.