Donald Trump, the President of the United States of America, seemed to be eager to open a new front in his trade wars with a plan to end the preferential trade treatment for India that grants duty-free entry for a maximum of $5.6 billion worth of its exports to the United States.
The move last Monday comes as the trade tensions between India and the United States intensified. The United States is attempting to rework pacts with some other countries as well, including China. Last week, President Trump has said that deals have cost millions of American jobs and has promised to reduce the trade deficits of the United States.
India, however, played down the impact. It said that it was keeping retaliatory tariffs out of its negotiations with the United States, however, the opposition could seize on the issue to embarrass Narendra Modi the Indian Prime Minister, ahead of the general elections that is scheduled this year.
Trump has repeatedly called out India for its huge tariffs, and trade officials of the United States said that scrapping the concessions would take at least 60 days after the notifications to Congress and the government of India.
In a letter that was addressed to congressional leaders, Trump said: “I am taking this step because, after intensive engagement between the United States and the government of India, I have determined that India has not assured the United States that it will provide equitable and reasonable access to the markets of India.”
India is considered as the largest beneficiary of the Generalized System of Preferences (GSP) in the world, which dates from the 1970s. Ending its participation would be the strongest punitive action that the United States has taken against the country since President Trump took office.
Last February, Reuters reported the planned U.S. action. It comes as the United States and China seem to be close to a deal to roll back on the tariffs that were imposed by the US on at least $200 billion worth of goods from China.
In New Delhi, Commerce Secretary Anup Wadhawan stated: “Discussions are on with the United States, and given cordial and strong ties, (we are) keeping retaliatory tariffs out of it.”
He told reporters that the preferential treatment earned India an annual “actual benefit” of only $190 million,
Wadhawan added that of the 3,700 products covered, India used the concession for only 1,784.
Another government official, who spoke on condition of anonymity, stated: “The benefit to industry is low, U.S. tariffs are already low.”
He added: “GSP is more symbolic of the strategic relationship, not in value terms.”
Some still expect that the move will intensify the pressure on India to address the concerns of the US.
A Republican from Iowa and Chairman of the Senate Finance Committee, Chuck Grassley, stated: “The Indian government hasn’t engaged enough to address market access issues.”
He added: “For the sake of the many Americans and Indians who relied on GSP benefits, I hope that India will work to quickly address these legitimate concerns.”