Trump says India charges lot of tariffs, threatens to impose reciprocal tax

Context: US President-elect Donald Trump has said that India charges “a lot” of
tariff, reiterating his intention to impose reciprocal tariffs in retaliation
for what New Delhi will impose on the import of certain American products. Trump
made these remarks on Tuesday and said that India and Brazil were among
countries that impose high tariffs on certain US products. Imposing reciprocal
duties violates global trade rules but one must follow a “wait and watch”
approach to US President-elect Donald Trump’s remarks on imposing reciprocal
tariffs. Mr Trump has used measures like Section 232 of the Tariff Act which
allows the US to take unilateral measures against countries on national security
grounds.

Key points

·       Trump’s
Criticism: Historical Context of Tariff Disputes - Trump has previously
criticized India’s tariffs, calling it a “tariff king” and claiming India
imposes “very high” tariffs. In 2019, he said India charged “100% tariffs” on
American products like Harley-Davidson motorcycles, arguing that this was
unfair compared to zero tariffs on Indian products sent to the US.

Proposal for
Reciprocal Tariffs - Trump has suggested that if he returns to power in
2024, he will consider adding tariffs on Indian goods to balance what he sees
as unfair practices. He stresses the need for fairness in trade, proposing that
if India charges high tariffs, the US should respond with similar tariffs.

·       Tariffs: Are taxes
imposed by a government on imported goods, used to protect domestic industries
from foreign competition by making imported goods more expensive. In Trump's remarks,
he points to high tariffs in India as a barrier to trade.

Ø  Reciprocal
Tariffs - This concept refers to the idea of imposing tariffs that mirror those of
another country. Trump suggests that if India imposes high tariffs on U.S.
goods, the U.S. should respond with similar tariffs on Indian goods. This
strategy is intended to promote fairness and balance in trade relations.

·       Analysis
of India’s Tariff Structure: Current Tariff Rates - India’s average
tariff rate is around 17%, which is much higher than that of developed
countries like Japan, the US, and the EU, where rates are between 3% and 5%. However,
when compared to other developing countries, India’s rates are competitive. For
example, Brazil and South Korea have average tariffs of 13% and 13.4%,
respectively.

Contextualizing
High Tariffs - Experts argue that while India imposes high duties on certain products,
this practice is common among many countries to protect their own industries.

·       Implications
for India-US Relations: India-US Trade Negotiations - Trump’s
comments highlight ongoing tensions in India-US trade relations, especially
regarding tariffs. For the US to gain zero-tariff access to Indian markets,
experts suggest pursuing a free trade agreement (FTA).

Strategic
Considerations - As the US and India work on their trade relationship, understanding the
details of tariff structures and the historical context is crucial. With Modi's
upcoming visit, there may be chances for discussion to address these tariff
concerns and promote better trade cooperation.

·       Conclusion: Trump’s remarks
about India’s tariffs reflect broader issues in international trade. While
India’s tariff rates are higher than those of many developed nations, they are
similar to those of other developing countries. As the US and India continue to
negotiate their trade relationship, addressing these tariff differences will be
important for strengthening cooperation and economic growth.