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Yet another trade war?? This time it’s with India

PortandTerminal.com, June 16, 2019

India just predictably increased its tariffs on US exports, dealing another blow to fragile global trade. The goods targeted include American apples — which will be hit with a 70% tariff — as well as almonds, lentils and several chemical products

New Delhi, India – As of last week, the United States is now officially in various trade wars with 2.7 billion consumers on our planet.

America’s most recent trade war is with India. Let’s call the latest one “Trade War 2.0” just to keep things straight. We’ll come to it in a moment.

First we need a brief recap on Trade War 1.0

Trade War 1.0 | China

One example – Iowa: The Trump Administration’s trade war with China has badly hurt farmers in Iowa

America’s first trade war since President Trump took office has famously been with China. That war has seen a tit-for-tat levelling of tariffs on each country’s exports to the other. How has that one gone for America? Poorly according to the US Chamber of Commerce, Washington’s most powerful business group.

“Proposed tariffs could lead to 2m job losses and cost the average American family $2,000”

Walmart, Target & J Crew business executives

The Financial Times reported today that the US Chamber of Commerce is urging the Trump administration to end its trade war with China, saying that its tariffs risk costing the US economy $1tn over the next decade.

In other news last week, 600 companies, including the retailers Walmart, Target and J Crew, put their names to a letter warning that the proposed tariffs with China could lead to 2m job losses and cost the average American family $2,000.

Trade War 2.0 | India

President Donald Trump took office in 2017 vowing to act against countries with which America has a large trade deficit. President Trump’s first target was with China in Trade War 1.0. His most recent battle is with India in Trade War 2.0.

To understand the origin of Trade War 2.0 we need to know a bit about something called the Generalized System of Preferences, or GSP for short.

Generalized System of Preferences

The Generalized System of Preferences (GSP) is a U.S. trade program designed to promote economic growth in the developing world by providing preferential duty-free entry for up to 4,800 products from 129 designated beneficiary countries and territories. GSP was instituted on January 1, 1976, by the Trade Act of 1974. GSP has allowed India to export to the United States a range of different products duty-free.

The problem is that India exports more to the United States than vice versa which has upset President Trump.

As of June 5th, the United States scrapped trade privileges under the Generalized System of Preferences for India, the biggest beneficiary of the scheme that allowed duty-free exports of up to $5.6 billion.

How has India responded?

India has predictably responded by punishing US exporters to India with a set of their own trade tariffs.

India will impose higher retaliatory tariffs on 28 U.S. products including almonds, apples and walnuts from Sunday, following Washington’s withdrawal of key trade privileges for New Delhi.

India is by far the largest buyer of US almonds, paying $543m for more than half of US almond exports in 2018 (US Department of Agriculture)

American almond and apple farmers will be especially hit hard. US Department of Agriculture data shows that India is by far the largest buyer of US almonds, paying $543m for more than half of US almond exports in 2018. India is also the second-largest buyer of US apples, taking $156m worth in 2018.

What next?

India to impose retaliatory tariffs on 28 US goods in response to the US scrapping their GSP privileges

Secretary of State Mike Pompeo, who is expected to visit India later this month, said this week the United States is open to resolving trade differences with the country if there’s greater access for U.S. firms to its markets, according to Reuters.


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