United States President Donald Trump appeared ready to open a new front in his trade wars Monday with a plan to end preferential trade treatment for India that allows duty-free entry for up to US$5.6 billion worth of its exports to the United States.
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“I am taking this step because, after intensive engagement between the United States and the government of India, I have determined that India has not assured the United States that it will provide equitable and reasonable access to the markets of India,” Trump told congressional leaders in a letter.
India played down the impact, saying it was keeping retaliatory tariffs out of talks with the U.S., however, the opposition could seize on the issue to embarrass Prime Minister Narendra Modi ahead of general elections this year.
“Discussions are on with the United States, and given cordial and strong ties, (we are) keeping retaliatory tariffs out of it,” Commerce Secretary Anup Wadhawan said.
India is the world’s largest beneficiary of the Generalized System of Preferences (GSP), which dates back to the 1970s. Ending its participation would be the strongest punitive action against it since Trump took office. The U.S. Trade Representative’s Office said India’s removal from the GSP would not take effect for at least 60 days after the notifications.
“The benefit to industry is low, U.S. tariffs are already low,” said another government official, who spoke on condition of anonymity. “GSP is more symbolic of the strategic relationship, not in value terms.”
Trade ties with the United States suffered after India adopted new rules on e-commerce curbing how internet retail giants Amazon and Walmart-backed Flipkart do business. India delayed higher tariffs on some U.S. imports until April 1, announced in response to a U.S. refusal to exempt it from new steel and aluminum tariffs
Though the impact is limited, the GSP removal could affect Modi’s Hindu nationalist ruling party ahead of the election expected in May.