US duty hikes begin to hurt as steel exports plunge 42%

10-Sept-2018

India’s exports of steel items to the US affected by sanctions slapped by the Donald Trump administration plunged 42% in the June quarter, after duty hikes imposed on the grounds of national security took effect in March, even as exports of aluminium items to the US, facing similar sanctions, jumped 59%.

An official of India’s commerce ministry, which is pressing the US to exempt India from the duty hikes, observed that aluminium exports may be gaining due to a comparative advantage as exports from Canada, Mexico and China may have become more expensive to the US. “It’s too early to draw any conclusion on the basis of one-quarter data,” the official said on condition of anonymity.

While exports of 68 steel items, facing 25% duty hike from the US, stood at $115 million in the June quarter, exports of seven aluminium items, facing 10% tariff hike, jumped to $164 million during the same period, India’s commerce ministry data showed. Overall steel exports to the US fell 5.7% to $468 million during the June quarter, while aluminium exports rose 54% to $181 million during the same period.

India is currently negotiating a trade package with the US. Indian officials last month completed the third round of negotiations with their US counterparts in Washington DC, terming the talks “encouraging”. A US delegation is expected to shortly visit India for further negotiations. Apart from a waiver from steel and aluminium duty hikes, India is demanding suspension of the review of its eligibility for the generalized system of preferences through which the country exports goods worth $5.6 billion to the US. The US is pressing for greater market access in dairy, medical devices and removing some trade restriction measures.

Like many other countries, India has taken the view that the measures by the US are safeguard measures, though they are in the name of national security. It has claimed that steel and aluminium exports worth $1.2 billion to the US have been impacted after the tariff hike, with the US collecting additional tariffs worth $241 million. After the US rejected India’s request for an immediate waiver, India dragged the US to the dispute settlement mechanism at the World Trade Organization (WTO) over the matter. Other countries and groupings that raised the issue at WTO include China, the European Union (EU), Canada, Switzerland, Russia, Norway and Mexico.

India on 20 June notified that it will hike tariffs on 29 US products, including almonds, apples and phosphoric acid, worth $10.6 billion in imports in retaliation to the steel and aluminium tariff hikes by the US. India did not impose the tariffs immediately, unlike other major US trading partners. The US on 16 July challenged tariff retaliation moves by China, the EU, Canada, Mexico and Turkey at WTO. However, it avoided dragging India into the dispute at WTO.

India decided to further defer the tit-for-tat retaliatory tariffs on 29 US products worth $235 million by 45 days till 18 September, which were to take effect on 4 August, as the two countries were engaged in bilateral negotiations to finalize the trade package to douse tensions.

Trump has often pointed to the bilateral trade surplus India enjoys, claiming that it restricts US exports through higher tariffs. He has raised the issue of higher tariffs imposed by India on Harley-Davidson motorcycles and has threatened to slap reciprocal taxes on Indian bikes. The US has challenged almost all of India’s export subsidies at WTO.

Source: LIVEMINT