NEW DELHI: As US president-elect Donald Trump on Wednesday asserted that the world’s largest economy would charge taxes (import tariffs) on India on a strictly reciprocal basis, experts here said the move would force open negotiations for greater market access between the two countries.
While Trump talked of reciprocity, product-to-product parity on tariffs is not possible because items of export for both countries are not the same as imports, they pointed out. One form the US action could take was matching the tariffs that India imposes on some US products with a similar burden on some other products that India sells to the US.
Trump’s comments that India imposes tariffs of 100% are also misleading, they noted. Only in some select products like automobiles and wines and spirits that the tariffs reach that level. Even the US has over 100% tariffs.
The outgoing Biden administration has imposed 100% tax on Chinese electric vehicles. “India’s average tariff stands at 17%, significantly higher than the US’s 3.3%, but comparable to countries like South Korea (13.4%) and China (7.5%),” an analysis by Global Trade Research Initiative (GTRI) said.
While the incoming US President singles out countries for warnings on tariffs, the World Trade Organisation’s (WTO) rules do not allow for country-specific import duties. Behind the talk on tariffs the intent of the US will be to seek greater market access for products of interest to them, director general and chief executive officer of Federation of Indian Export Organisations (FIEO) Ajay Sahai said. “India has to be ready for negotiations on some products of interest to the US.”
The US is not a big exporter of manufactured products to India. Within manufacturing the largest imports by India are of aircraft parts. US biggest exports to India are crude oil, coal, natural gas and diamonds. The areas where the US might seek more openness is in agriculture products.
“The US is the world’s largest agricultural products exporter. Barring rice it has surplus which it might want to sell to India like wheat, maize, groundnuts, soya, poultry and some other products,” trade expert, acting president and Distinguished Professor, Council for Social Development Biswajit Dhar.
He said there is speculation that the US might increase its crude oil production which it might be keen to sell to India. Crude oil is already the biggest item of import from the US. Last financial year it stood at $ 5 billion down from $ 10 billion in 2022-23.
Concessions in agriculture could hit at the very base of our agriculture self sufficiency as the US gives very high subsidies to capture export markets, Dhar said.
Retaliation on tariffs by the US could come in areas of manufacturing like electric vehicles, semiconductors where it is trying to build local capacity, Sahai said.
In the past three years, smartphone manufacturers in India by Apple have emerged as one of the biggest exports to the US. Experts do not expect duties there as the phone assembly is not a focus area of the US administration to revitalise manufacturing.
“Even though Trump’s claims about Indian tariffs may be overstated, India can seize this moment to strategically review its tariff structure. A targeted reduction in tariffs could be advantageous for India, aligning with its goal of boosting low-cost, value-added manufacturing and trade,” GTRI’s founder Ajay Srivastava said. “With 85% of tariff revenue generated by fewer than 10% of tariff lines, and 60% of lines contributing under 3% to revenue, India could lower its average tariff to around 10% without major revenue losses,” he added.
If the Trump administration gets aggressive on tariffs India has an option to retaliate as it did earlier in 2018, Srivastava said.
In 2018, when the US imposed tariffs on Indian steel and aluminum, India retaliated by increasing tariffs on 29 specific American products. This well-calibrated response ensured that India collected equivalent revenue from US imports. This dispute that was also fought in WTO also was laid to rest along with six others after bilateral consultations in 2023.“At this point we need to be aware of the threat Trump’s moves can pose to the US and prepare ourselves to counter it. Given the relations between the two leaders )Trump and Prime Minister Narendra Modi) there is a possibility of better engagement,” Dhar added.
Source: The Financial Express
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