Tariff war looms as US spikes India plea for duty rollback

Amiti Sen New Delhi | Updated on July 25, 2018

File Photo of US President Donald Trump.   -  Reuters

USTR office asks Steel Ministry to submit reworked proposal on steel, aluminium

India and the US failed to reach an agreement on the withdrawal of penal duties imposed by the Trump administration on Indian steel and aluminium, at a crucial meeting of officials last week: a development that could lead to a tariff war between the countries.

“The US Trade Representative’s office rejected India’s proposal of a complete rollback of the penal tariffs on the metals. The Steel Ministry has been asked to come up with a fresh proposal that could be acceptable to both. It seems it will take time to sort out the matter,” an industry official close to the development told BusinessLine.

Deadline nearing

If the two countries fail to resolve their differences over the tariff issue by August 4, which now appears to be the likely scenario, the retaliatory import tariffs announced by India on 29 items from the US, ranging from almonds to steel, are likely to come into force.

“New Delhi already delayed imposition of the retaliatory duties by a month-and-a-half to give the US time to resolve the issue. It is unlikely that it will bend over backwards and give the US more time in the absence of a resolution, unless it is given some tangible assurance,” a government official said.

The Indian delegation comprising officials from the Commerce Ministry and the Steel Ministry, which visited Washington last week, reiterated India’s position that the additional import tariff of 25 per cent on steel and 10 per cent on aluminium imposed by the US was unfair. India not only exported much lower volumes than other countries, including China, South Korea and the EU, but also did not pose any security threat, as stated by the US as the official reason for the duties, the team argued.

“The USTR officials said India’s representation was unlikely to be accepted by the White House and advised Steel Ministry officials to rework the proposal and pare it down,” the industry source said. However, it is not certain whether the Steel Ministry will be willing to change its demand. While it will come up with a reworked proposal, it could still ask for a complete rollback of the duties or settle for a partial one.

“The Steel Ministry will carry out its own internal consultations and see if it could come up with a reworked proposal that will not harm the interests of the industry,” the government official said.

As per a Finance Ministry notification dated June 20, import duties on 29 items from the US will be increased; these include almonds, walnuts, boric acid, diagnostic reagents, chickpeas, lentils, shrimp and certain iron products.

The import value of these items annually is approximately $240 million, which is the estimated loss suffered by Indian exporters due to US tariffs on steel and aluminium.

US may oppose

“The Indian action could bring about some reaction from the US. It could drag India to the WTO, the same way it has done five other members, including the EU, China and Turkey, which have imposed retaliatory duties for US action against their steel and aluminium. But we hope to settle the matter after some more negotiations,” the official added.

Published on July 24, 2018

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