March05,2019
US President Donald Trump said on March 4 that the United States would end preferential trade treatment for India. The United States may take action after 60 days, but if the two sides reach a new trade agreement by then, it may cancel the action.
In a letter to Congress, Trump said he is working to remove India from the Generalised System of Preferences. He criticized India as a "high tariff" country. What's more, the Indian government has not assured that it will provide USA with a fair and reasonable market.
Generalised System of Preferences (GSP) means developed countries offer reduced or exempted tariffs on products imported from developing countries in order to promote their economic growth. USA has implemented the GSP since the 1970s. GSP lowers US duties on exports from 121 developing countries. India was the biggest beneficiary of the program in 2017 with exemptions on goods worth $5.6 billion. However, since April last year, the US government has planned to deprive Thailand, Indonesia and India of none-tariff treatment.
In January, when the White House announced support for reciprocal taxation, Trump said India’s tariffs are too high. It charged the 150% import tariff on US whisky and 100% on Harley-Davidson motorcycles. Trump also said that he reduced the tariff on Harley-Davidson motorcycles by 50% in two minutes, but not enough. He wants the reciprocal tax, at least to tax India.
Tensions between USA and India have increased in recent years. Reuters analyzes that the recent trade friction is that India has enacted new e-commerce regulations restricting US companies to enter the Indian market, including Amazon and Flipkart. What's more, it is related to the development strategies of the two countries. Indian Prime Minister Modi hopes to attract foreign investment. It is an important strategic plan for "Make-in-India", which aims to turn India into a manufacturing hub and provide millions of young people with job opportunities. Meanwhile, Trump wants to make the US manufacturing industry rise again, and it is also an indispensable help for "Make America Great Again."