India has hiked tariffs on 28 goods imported from the United States as a trade spat between the two countries intensifies.
The retaliatory move came days after Washington removed New Delhi from a list of countries that have preferential access to its market.
“India has put its cards on the table,” says trade expert Biswajit Dhar at Jawaharlal Nehru University in New Delhi. “The U.S. has upped the ante and it is also threatening to take further action. This required India to respond.”
The trade spat has escalated ahead of a visit later this month to New Delhi by U.S. Secretary of State Mike Pompeo who has pushed India to allow American companies more access to its markets and to lower barriers.
Experts fear the growing tensions could cast a shadow over a deepening India-U.S. strategic partnership that aims at countering China’s growing influence.
The American goods that attract higher tariffs beginning Sunday include almonds, apples, walnuts, chickpeas and lentils, as well as some stainless steel products. New Delhi is the largest importer of U.S. almonds and the second largest buyer of apples. The total impact of the Indian tariffs is estimated to be about $240 million.
Increase deferred several times
The hike in duties by New Delhi was announced a year ago in retaliation for Washington’s imposition of higher tariffs on imported steel and aluminum, but deferred several times as both sides held talks to bridge their differences.
But India went ahead after the U.S. earlier this month imposed another punitive measure: removing New Delhi from a trade program to aid the economies of developing countries. Washington said the preferential status was revoked because India has failed to provide adequate access to its markets for U.S. firms. It will impact Indian imports worth $5.6 billion. New Delhi was the largest beneficiary of the Generalized Systems of Preferences program.
India’s commerce ministry has called the decision unfortunate.
U.S. President Donald Trump has repeatedly named India as one of the countries that follow trade practices unfair to the United States. Washington wants New Delhi to address a trade imbalance, the $142 billion bilateral trade is skewed in New Delhi’s favor by about $30 billion.
Dhar says among the sticking points are the demands by Washington that India lower tariffs on dairy and poultry to encourage U.S. agricultural imports. But these are areas where New Delhi faces domestic challenges.
“India is battling with this very large population of small and marginal farmers. It is very difficult for India to drop tariffs specially as we know U.S. agricultural products are being subsidized,” according to Dhar.
The United States is also concerned about recent rules that it says adversely impact the operations of its e-commerce companies such as Amazon and Walmart in India.
Even though the moves by New Delhi and Washington signal that each is taking a tougher stand, they could also push both sides to more serious negotiations to resolve their differences.
“We remain open to dialogue and hope that our friends in India will drop their trade barriers and trust in the competitiveness of their own companies, their own businesses, their own people,” Pompeo said at policy speech at the U.S. India Business Council in Washington on Thursday. He said that countries that have provided American companies access to their markets have seen “real opportunity.”
Pompeo will in New Delhi on June 25-26 to hold talks with his Indian counterpart. Indian Prime Minister Narendra Modi and U.S. President Trump are also expected to meet on the sidelines of the G-20 summit in Japan later this month.