US-INDIA Trade War. By- Mohit Singh.
US-INDIA Trade War, A Trade War That Is Running Parallel To US-China Trade War.
It's a fact that few years back when anyone used to talk about Trade War then the response that person used to get was, there could be no Trade War, the world economy is very stable, Donald Trump is a very smart businessman and he won't push US into a trade war, but soon US-China Trade War happened followed by USA Trade war with multiple countries and consequently India too fell into Trade War with the US.
It's a fact that few years back when anyone used to talk about Trade War then the response that person used to get was, there could be no Trade War, the world economy is very stable, Donald Trump is a very smart businessman and he won't push US into a trade war, but soon US-China Trade War happened followed by USA Trade war with multiple countries and consequently India too fell into Trade War with the US.
The Trade War that's going on between US and India is very important at least from India's point of view as we need to observe, to what extent this ongoing Trade War would impact India's relation with US and does India require to change her foreign policy in the coming years.
Developments: India hiked duty on 29 category of items that were imported from the US. This was basically a retaliatory step taken by India against US imposing high tariffs on steel and aluminium imports from all over the world, so India too was a part of this when an announcement was made by the US regarding imposition of high tariffs. Imports from India were ridiculously overpriced in American market obviously due to high tariffs, thus the sale of Indian products in American market especially steel and aluminium declined day by day thus India retaliated.
U.S - India Trade War: India US trade war is of great importance because the trade worth between these two countries is quite massive. If we see steel and aluminium alone then US imports steel items worth $800 million and aluminium items worth $430 million so the total steel and aluminium that US imports from India stands at $1.2 billion approximately. The tariffs that US has imposed on Indian steel and aluminium are 25% and 10%. US government through tariffs on India aims to earn around $241 million thus India in retaliation imposed tariffs on US imports in such a calculated way that Indian government also can manage to generate a revenue of $241 million.
India was successful in implementing these tariffs because of it's meeting with WTO in Geneva. India told WTO (World Trade Organisation) that India is planning to impose tariffs of exact same amount that US has imposed on Indian Products, as India is suffering multiple losses so in order to nullify those losses to some extent India wants to impose tariffs on 30 products imported from the US, and thus India can also generate revenue of exact same amount of $241 million. At present it is 29 products but at the beginning it was 30 products, the reason is, India initially wanted to impose tariffs on 30 products imported from the US as India counted 'Harley Davidson' as well but later India exempted Harley Davidson from tariff thus reducing tariff imposed products to 29. There is no exact reason for this exemption because Harley Davidson sale in India isn't too much as very few people in India can afford such costly bikes so including or excluding Harley Davidson from tariff doesn't really make much of a difference. But it is very sure that Americans are very close to this bike and if India would have imposed tariffs on Harley Davidson then US media would have criticised Donald Trump even more, so here India exempting Harley from tariffs is more like a sign of 'Good Gesture', by preventing Trump from further criticism and Trump was very pleased by this move, as in one of his tweet Trump wrote "Oh! INDIA loves Harley".
So India finally announced that tariffs will be functional on 29 products imported from USA.
Official Statement that was released by India, "India wishes to clarify that suspension of concessions shall be equivalent to the amount of trade affected by United States' measures" this statement simply means, whatever US government has taken away from India, India too will take away an equivalent amount from the US.
Talks and Policies Regarding Luxury Bikes: Bikes having displacement beyond 800cc are luxury bikes. Prior to Trump regime the tariffs on Harley Davidson was 100%, which definitely made Harley far more dearer. When Donald Trump came to power he asked Indian government that why the tariffs imposed on Harley is so high, so in order to maintain good relation Indian government reduced the tariff on Harley from 100% to 50%. Trump again asked that why even 50%, he insisted that it must further go down but this time Indian government in a statement said that "we will retain this tariff in addition we will not include Harley in the list of High Tariff imposed products, though 50% tariff will be functional on Harley" .
Almonds at the top in Tariff list: If we see the list of products on which high tariffs are imposed then one can find Almonds are the worst hit. Almonds which are fresh or dried in shell is the category that will bring in the highest additional duties.
Almonds that are imported from USA, their duty was hiked from Rs 35 per kg to Rs 42 per kg which means if one Kg of Almond that used to cost 300+35= Rs 335, will now cost 300+42= Rs 342, and this is the price at Indian ports, which means minimum price, after which Indian market is free to decide at what price it wants to sell depending on every seller's different demand for profit. But after this hike in duty Indian government is poised to earn an extra $120 million every year.
India's attempt to Pacify US: Imposition of tariffs by India on imports from US was a very brave move but at the same time Indian government needs to maintain good relations with US as well. So, amid trade war India has offered to buy 1,000 planes and more oil from US in the near future in order to pacify US. So, here India has made an attempt to create a balance between relations with US and to neutralise the losses that India was facing due to USA imposing tariffs on Indian imports.
Expenditure: When it comes to buying 1000 commercial planes and oil from USA, India has calculated that it will have to pay about $5 billion a year for aircraft and about $4 billion for purchase of oil and gas from the US. This expenditure has nothing to do with defence purchases from USA. For defence there is a separate deal and a separate budget has been allocated by India, in which India is looking forward to buy 12 more naval surveillance aircraft P8i. India is now the second largest owner of these surveillance aircraft after US.
Effect of India-US relations: If we look back in past then we would notice that India-US relations have taken multiple dramatic turns. There were days when India enjoyed good relations with US and there were days when US imposed sanctions on India on many occasions. So, the way things are going in 2019, India will have to move very cautiously as US has imposed sanctions on Russia thus restricting India from acquiring new arms and ammunition from Russia as India has plans to acquire S400 from Russia and as per the act if India acquires any further equipment from Russia then US can impose sanctions on India as well. In the case of Iran also India cannot buy oil from Iran due to sanctions on Iran by the US, in addition this will also affect the progress of International North South Transport Corridor as Chabhahar port in Iran is the key to success of INSTC. If India fails to develop Chabhahar port to its full potential due to sanctions on Iran then China's BRI (Belt and Road Initiative) will dominate the whole subcontinent, so it is important for India to develop Chabhahar port to its full potential under any circumstance, as Chabhahar port is the best option for India that can curb the domination of China's BRI.
Way Forward: The US needs to realise that these tariffs will slow down India's military and economic growth. An economically and militarily weak India will be of no use to USA in defending and strengthening the liberal order in the Indian Subcontinent and Indo Pacific region as well.
Talks and Policies Regarding Luxury Bikes: Bikes having displacement beyond 800cc are luxury bikes. Prior to Trump regime the tariffs on Harley Davidson was 100%, which definitely made Harley far more dearer. When Donald Trump came to power he asked Indian government that why the tariffs imposed on Harley is so high, so in order to maintain good relation Indian government reduced the tariff on Harley from 100% to 50%. Trump again asked that why even 50%, he insisted that it must further go down but this time Indian government in a statement said that "we will retain this tariff in addition we will not include Harley in the list of High Tariff imposed products, though 50% tariff will be functional on Harley" .
Almonds at the top in Tariff list: If we see the list of products on which high tariffs are imposed then one can find Almonds are the worst hit. Almonds which are fresh or dried in shell is the category that will bring in the highest additional duties.
Almonds that are imported from USA, their duty was hiked from Rs 35 per kg to Rs 42 per kg which means if one Kg of Almond that used to cost 300+35= Rs 335, will now cost 300+42= Rs 342, and this is the price at Indian ports, which means minimum price, after which Indian market is free to decide at what price it wants to sell depending on every seller's different demand for profit. But after this hike in duty Indian government is poised to earn an extra $120 million every year.
India's attempt to Pacify US: Imposition of tariffs by India on imports from US was a very brave move but at the same time Indian government needs to maintain good relations with US as well. So, amid trade war India has offered to buy 1,000 planes and more oil from US in the near future in order to pacify US. So, here India has made an attempt to create a balance between relations with US and to neutralise the losses that India was facing due to USA imposing tariffs on Indian imports.
Expenditure: When it comes to buying 1000 commercial planes and oil from USA, India has calculated that it will have to pay about $5 billion a year for aircraft and about $4 billion for purchase of oil and gas from the US. This expenditure has nothing to do with defence purchases from USA. For defence there is a separate deal and a separate budget has been allocated by India, in which India is looking forward to buy 12 more naval surveillance aircraft P8i. India is now the second largest owner of these surveillance aircraft after US.
Effect of India-US relations: If we look back in past then we would notice that India-US relations have taken multiple dramatic turns. There were days when India enjoyed good relations with US and there were days when US imposed sanctions on India on many occasions. So, the way things are going in 2019, India will have to move very cautiously as US has imposed sanctions on Russia thus restricting India from acquiring new arms and ammunition from Russia as India has plans to acquire S400 from Russia and as per the act if India acquires any further equipment from Russia then US can impose sanctions on India as well. In the case of Iran also India cannot buy oil from Iran due to sanctions on Iran by the US, in addition this will also affect the progress of International North South Transport Corridor as Chabhahar port in Iran is the key to success of INSTC. If India fails to develop Chabhahar port to its full potential due to sanctions on Iran then China's BRI (Belt and Road Initiative) will dominate the whole subcontinent, so it is important for India to develop Chabhahar port to its full potential under any circumstance, as Chabhahar port is the best option for India that can curb the domination of China's BRI.
Way Forward: The US needs to realise that these tariffs will slow down India's military and economic growth. An economically and militarily weak India will be of no use to USA in defending and strengthening the liberal order in the Indian Subcontinent and Indo Pacific region as well.
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