A Quick Guide To The US-India Trade Problems: How It All Started

US President Donald Trump on Thursday described as "unacceptable" the tariffs hiked by India on American products and demanded that they be withdrawn.

File Picture: Prime Minister Narendra Modi meeting the President of United States of America (USA), Donald Trump, at the Joint Press Statement, at White House, in Washington DC, USA. (Photo: PTI)

NEW DELHI: US President Donald Trump on Thursday described as "unacceptable" the tariffs hiked by India on American products and demanded that they be withdrawn. He said this ahead of his crucial meeting with Prime Minister Narendra Modi on the sidelines of the G-20 Summit in Japan which is likely to be dominated by growing global trade frictions. President Trump, championing his 'America First' policy has been a vocal critic of India for levying "tremendously high" duties on US products, has described the country as a "tariff king". "I look forward to speaking with Prime Minister (Narendra) Modi about the fact that India, for years having put very high Tariffs against the United States, just recently increased the Tariffs even further. This is unacceptable and the Tariffs must be withdrawn!" Trump said in a tweet early this morning on his way to Osaka, where the G20 Summit will open on Friday.

I look forward to speaking with Prime Minister Modi about the fact that India, for years having put very high Tariffs against the United States, just recently increased the Tariffs even further. This is unacceptable and the Tariffs must be withdrawn!

— Donald J. Trump (@realDonaldTrump) June 27, 2019

Trump will hold a bilateral meeting with Prime Minister Modi on Friday on the sidelines of the G-20 Summit. This would be his first meeting with Modi after the BJP's landslide win in the general elections. Trump's tweet came a day after the India visit of Secretary of State Mike Pompeo, during which he met Modi, External Affairs Minister S Jaishankar and National Security Advisor Ajit Doval and discussed a number of issues, including the trade friction. The US president had earlier taken aim at China, saying Beijing wanted to do a deal because the world's number-two economy was "going down the tubes". Furious at what he sees as an unfair advantage in the trading system, Trump has already hit Beijing with $200 billion in levies on Chinese imports and appeared to threaten more. Indo-US trade issue: How it started

• June 5, 2019 - United States withdrew the Generalised System of Preferences (GSP) benefit offering duty-free access to Indian exporters for certain products, accusing India of ‘unfair market access’.
• May 3, 2019 - Twenty-four members of the United States Congress sent the administration a letter on urging it not to terminate India’s access to the GSP.
• March 2018 - America had imposed 25 per cent tariff on steel and a 10 per cent import duty on aluminium products. Earlier, there was no duty on these goods.

What is GSP

• It is the largest and oldest U.S. trade preference programme designed to promote economic development.
• Under GSP, Washington allows duty-free entry for thousands of products from designated beneficiary countries.
• How it happens – Under the GSP category, exports are allowed at zero or low duties

Reasons for the US taking steps against India

• The trade imbalance with India
• The US feels that India has not reciprocated
• They again view that there is no access to US dairy and medical device industry products in the country

India gained from GSP

• India has been the largest beneficiary of this duty-free programme
• India exported an estimated $5.6 billion (Rs. 38,701 crore) worth of goods to the United States under GSP in 2018
• It is 11 per cent of total export under the US
• India’s top GSP exports to the United States - Motor vehicle parts, ferroalloys, precious metal jewellery, building stone, insulated cables and wires
• 1,784 Indian items covered under GSP
• Actual benefit under GSP for India - $250 million (Rs. 1,727 crore) a year
• Extra tariffs – After the removal of GSP on products there would be 2 to 3 per cent tariff on such products

India’s Retaliatory action

• June 16, 2019 - India slapped higher tariffs on 28 US products following Washington's withdrawal this month of key trade privileges for New Delhi.
• Major products cover - almond, pulses and walnut etc.
• Impact - They will have to pay higher duties, making those items costlier in the Indian market.
• India has also dragged the US to the World Trade Organisation's (WTO) dispute settlement mechanism over the imposition of import duties on steel and aluminium.

India’s trade with  the United States (2018-19)

• India’s export to the US – Rs. 366,484 crore
• India's import from the US – Rs. 248,553 crore
• Total Trade – Rs. 615,037 crore