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Trade will be an irritant in US-India ties, reciprocal taxes likely: White House

India, with a $30.8 billion deficit in 2016, is among a group of countries with whom the United States has a trade deficit.

india Updated: Mar 17, 2018 10:57 IST
Yashwant Raj
Yashwant Raj
Hindustan Times, Washington
US President Donald Trump has railed against Indian tariffs on Harley-Davidson motorcycles, and threatened to impose “reciprocal taxes”.(AP)

The United States has said it expects “free, fair and reciprocal” trade with India, and acknowledged it could cause the “most friction” in ties between the two countries which are otherwise on a “very strong footing”.

Although the US government committed to “expanding the strategic partnership”, President Donald Trump has railed against Indian tariffs on Harley-Davidson motorcycles and threatened to impose “reciprocal taxes”. On Wednesday, his administration challenged a bunch of Indian export subsidies at the World Trade Organization (WTO).

Trade has been the thorniest issue in India-US ties for a long time, traversing administrations, as has been acknowledged privately by officials of both sides. But Trump’s recent public attacks appear to have added a new edge to the differences, demonstrating it as a new low.

“If you had a point … (in) the relationship where you had the most friction, it certainly would be on the trade side,” a senior administration official told reporters on Friday, acknowledging differences on the issue.

But the official defended them, seeking perspective. There have been “concerns raised about the trade deficit with India” and, as has been stated by the President. There are no tariffs on Indian motorcycles imported into the United States while India levies 50% import duty on Harley-Davidsons.

India is among a group of countries with whom the United States has a trade deficit. But the $30.8 billion deficit in 2016 is quite low compared to China’s $385 billion, but enough to put it on Trump’s radar, as a country responsible for the combined $800 billion trade deficit he has promised to wipe out.

The deficit has dipped recently, which the official acknowledged, based on massive oil and gas imports ordered by India from the United States. And it is likely to go down further because of other high-value imports, such as the order of civilian aircraft ordered by private Indian airlines companies. (SpiceJet plans to buy over 100 planes from Boeing.)

President Trump had been impressed enough to bring it up in his joint news conference with Prime Minister Narendra Modi at the White House last June: “I was pleased to learn about an Indian airline’s recent order of 100 new American planes, one of the largest orders of its kind, which will support thousands and thousands of American jobs.”

And, India has also cut the tariff on Harleys substantially to 50% from 75% and 100% (the last slab was for used vehicles, which India wants to keep out, thus the prohibitively high rate).

Asked if the US wanted to see the tariff reduced to zero, the official said, “I would just note that Indian motorcycles that are imported into the US don’t have any tariffs on them... and the President is very clear, he is looking for fair and reciprocal trade with India.”

“This administration has shown its commitment to expanding the strategic partnership,” the official said in a briefing marked by the administration’s disappointment with Pakistan’s patchy record on counter-terrorism.

First Published: Mar 17, 2018 10:46 IST