US steps up pressure on India to cut tariff

New Delhi: US businesses and diplomats are pressing India to cut tariffs, industry and government sources say, after New Delhi’s move to increase customs duties on dozens of products to help its flagship Make-in-India drive aggravated differences over trade.

Ford, which has two plants in India, has sought a reversal of the new tariffs on auto components, while Apple Inc is concerned its iPhones have become even more expensive in the price-conscious $10-billion smartphone market.

India and the United States have built close political ties. But trade friction is casting a shadow.

A US State Department spokesperson in Washington said that India should lower trade barriers, which were holding back economic ties.

Mr Trump has already called out India for its duties on Harley-Davidson motorbikes, and this month Mr Modi ordered them cut to 50 percent from 75 percent for high-end bikes.

But that has not satisfied Mr Trump, who pointed to zero duties for Indian bikes sold in the United States, saying he would push for a “reciprocal tax” against countries, including US allies, that levy tariffs on American products.

“It is important that India make greater efforts to lower barriers to trade, including tariff and non-tariff barriers, which will lower prices to consumers, promote development of value chains in India,” said the US State Department spokesperson, referring to Mr Trump’s comments on motorbikes.

The US Congress has been pushing over the past year for greater pressure on India to dismantle economic barriers, and now House Republicans have raised the issue of the new round of duties with New Delhi.

“We conveyed our concerns to the Indian government last week to rai-sing tariffs above WTO rates — especially as it relates to IT,” a Republi-can aide in Washington said.

India announced higher import tax on electronics products such as mobile phones and television sets in December, and then on 40 more items in the budget this month. These included goods as varied as sunglasses, juices and auto components.

India says the move is aimed at giving local industry the chance to grow and is part of a broader plan to lift the share manufacturing makes up of GDP to a quarter, from around 15 percent, and create the tens of thousands of jobs needed for a young workforce.

The Indian commerce ministry did not respond to a request for a comment on the US criticism of the import taxes. But a senior finance ministry official defended the decision to raise duties, saying it reflected a trend in other parts of the world.

“When all the major economies, including the US and China, are following protectionist policies, why are we being questioned,” the official said.

Bilateral trade between India and the United States has grown to about $115 billion in 2016 from $20 billion in 2001.  The US buys close to a fifth of India’s goods and services exports and its trade deficit has widened from $13 billion in 2006 to $31 billion in 2016.

The USTR’s office is “fairly negative” on India at this point and is analysing the impact of the customs trade tariffs on various American companies, an industry source said.