India spared worst of US ‘forced labour’ tariffs, but hard talks loom

India has been spared the worst of Washington’s latest tariff action, but analysts say much work still needs to be done to secure a long-awaited US trade deal despite the lower-than-expected levy. The Trump administration’s fresh round of tariffs, unveiled last week, targeted 60 economies it accuses of failing to curb imports made with forced labour. As late as last month, India was being threatened with a 12.5 per cent rate, but ultimately earned a place among the 17 economies – including Canada, Britain, Bangladesh and Pakistan – hit with the lower 10 per cent tariff. The reprieve followed India amending its foreign trade policy on June 14 to ban imports of goods made with forced labour, which US Trade Representative Jamieson Greer cited when placing India in the lower tariff band. Washington’s new tariffs were imposed under Section 301 of the US Trade Act, a tool used to respond to trade practices the US considers unreasonable, unjustifiable or discriminatory. They replaced temporary global levies imposed following a Supreme Court ruling in February that struck down much of last year’s “Liberation Day” tariff regime. Goods exempt from Friday’s tariff include generic pharmaceuticals and smartphones, but India notably missed out on the textile and apparel carve-outs granted to Bangladesh, Cambodia, Indonesia and Malaysia. Steel, aluminium, copper and auto parts were also exempted from the tax, though only because these are already subject to existing US tariffs of between 25 and 50 per cent. Roughly 70 per cent of India’s exports to the United States will be subject to the new duty, according to the Global Trade Research Initiative, a New Delhi-based think tank. Ajay Srivastava, a trade expert and think tank’s founder, said Washington had not produced any evidence to justify the new levy, saying it “appears designed to preserve the Trump administration’s tariff wall rather than address an unproven forced-labour problem in India”. “The 10 per cent US tariff on Indian exports under the forced-labour investigation lacks a credible factual basis,” he said. Still, other Indian observers like Uday Chandra, a professor of political science at Ashoka University, have chosen to see the lower rate as “an important symbolic gesture”. “It is a confidence-building measure in ongoing negotiations,” he said, referring to talks on a new US-India trade deal that have been under way since February last year, shortly after US President Donald Trump’s return to the White House. India’s commerce ministry adopted a similarly conciliatory tone in a statement on Friday, noting the introduction of the new tariffs and pledging to work “towards the early conclusion” of a bilateral trade pact. Finer details still in dispute include US demands for increased market access to India’s dairy and agriculture sectors, with Indian farmers taking to the streets in protest earlier this month against the feared impact. Biswajit Dhar, an economics professor at the Council for Social Development think tank in Delhi, said India would still have to be mindful “about how much ground we yield to the US” in the ongoing trade talks, despite the apparent tariff reprieve. “Our bottom line is we should not lose our competitive advantage,” he said, referring to India’s exports compared with other nations. Our bottom line is we should not lose our competitive advantage Biswajit Dhar, Indian economics professor Washington has been pushing hard to slash trade deficits with other countries – a major justification used for the “Liberation Day” tariffs – since Trump’s return to office. India’s trade surplus with the US narrowed in the financial year ended March to US$34.41 billion from US$40.88 billion a year earlier, according to figures cited by state broadcaster Doordarshan. In addition to the 10 per cent tariff imposed on Friday and the US duties on Indian steel, aluminium, copper, and certain auto parts, a separate Section 301 investigation is also under way into excess manufacturing capacity, which could bring fresh levies on India and 15 other economies. Keeping the peace For Russell A. Stamets, a partner at Delhi-based law firm Circle of Counsels, the new 10 per cent tariff reads as a sign that Washington “is hopeful of an overall trade agreement”. “I think it is a signal that the US … looks to keep the peace with India,” he said. Stamets was quick to temper any notion that Delhi would have to “back down”, however. “These are two countries with linked interests,” he said. “The idea that one country can go up and the other go down is incorrect. They can only make an agreement where both prosper.” Murkier trade threats on the horizon were unlikely to derail progress, he said, referring to a bipartisan US Senate push to slap 100 per cent tariffs on buyers of Russian oil – India included. “The US has demonstrated a fairly textured understanding of India’s energy needs and the role that Russia plays in fulfilling those needs,” Stamets said, noting the 30-day waiver Washington granted Delhi to import stranded Russian crude amid the war on Iran. If anything, he said the economic fallout from the Middle East conflict had added impetus for “both the US and India to make something good out of this agreement”. “The US has too much of a stake in India’s progress,” Stamets said. “India is strong enough to bargain confidently and that is what we will see in the trade agreement.” “I don’t see an appetite for dogmatism on either side,” he added.

India spared worst of US ‘forced labour’ tariffs, but hard talks loom

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}New Delhi avoided a higher tariff rate via a timely policy change, but US demands and Russian oil friction leave a trade deal in limbo

New Delhi avoided a higher tariff rate via a timely policy change, but US demands and Russian oil friction leave a trade deal in limbo