Economics Prelims cum Mains

Trade war between India and US

The News

  • India has increased customs duty on 29 products, including pulses and iron and steel products, imported from the US as a retaliatory action against the tariff hike by Washington.

 

 

Background

  • United States is adopting protectionist policies and hiking import duties.
  • In March 2018, US imposed tariffs on steel and aluminium items- 25% and 10% respectively, imported from all countries except Canada and Mexico.
  • The duty imposed by the US has affected steel exports by $198.6 million and aluminium shipments by $42.4 million.
  • India dragged the US to the World Trade Organisation’s (WTO) dispute settlement mechanism over the imposition of import duties on steel and aluminium.
  • In retaliation to the unilateral increase in tariff by the US, India also hiked its duties that would have an equivalent tariff implication for the US.
  • In addition to India, the European Union also has decided to levy higher import duties on a variety of US products and a similar action is being contemplated by China.

 

Note:

  • India exports steel and aluminium products worth about $1.5 billion to the US every year.
  • India’s exports to the US in 2016-17 stood at $42.21 billion, while imports were $22.3 billion.
  • India ranks ninth on the list of trading partners that run a trade surplus with the U.S, i.e. it exports more to the U.S. than what it imports.

 

Impacts

  • The move by President Trump to impose heavy tariffs on imported steel and aluminium items has sparked fears of a global trade war.
  • These increases would make the domestic products cheaper compared to imports and lead to domestic manufacturing/demand pick-ups as a corollary.

 

 

 

Resolving mechanism:

  • Commerce and Industry Minister went on a two-day visit to the US earlier this month to discuss these matters with top officials.
  • On June 26-27, senior government officials of the two countries will hold meetings to discuss these matters further.

 

Bilateral trade between India and US

India imports from US in 2017:

  • Precious metal and stone (diamonds) ($7.0 billion)
  • Mineral fuels ($2.8 billion)
  • Aerospace ($2.1 billion)
  • Machinery ($2.1 billion), and
  • Optical and medical instruments ($1.4 billion).

 

India exports to US in 2017:

  • Precious metal and stone (diamonds) ($10.6 billion),
  • Pharmaceuticals ($6.3 billion),
  • Mineral fuels ($2.7 billion), machinery ($2.64 billion), and
  • Miscellaneous textile articles ($2.6 billion).

    

Top 10 imports of India (with the highest dollar value) during 2017:

  1. Mineral fuels including oil: US$123 billion (27.7% of total imports)
  2. Gems, precious metals: $74.4 billion (16.7%)
  3. Electrical machinery, equipment: $46.9 billion (10.6%)
  4. Machinery including computers: $36 billion (8.1%)
  5. Organic chemicals: $18 billion (4%)
  6. Plastics, plastic articles: $13 billion (2.9%)
  7. Animal/vegetable fats, oils, waxes: $11.9 billion (2.7%)
  8. Iron, steel: $10 billion (2.2%)
  9. Optical, technical, medical apparatus: $8.4 billion (1.9%)
  10. Ores, slag, ash: $5.9 billion (1.3%)

 

Top 10 exports of India (with the highest dollar value) during 2017:

  1. Gems, precious metals: US$42.6 billion (14.4% of total exports)
  2. Mineral fuels including oil: $35.9 billion (12.1%)
  3. Machinery including computers: $16.7 billion (5.6%)
  4. Vehicles: $16.2 billion (5.5%)
  5. Organic chemicals: $13.6 billion (4.6%)
  6. Pharmaceuticals: $12.9 billion (4.4%)
  7. Iron, steel: $11.7 billion (4%)
  8. Clothing, accessories (not knit or crochet): $9 billion (3%)
  9. Electrical machinery, equipment: $8.8 billion (3%)
  10. Knit or crochet clothing, accessories: $8.3 billion (2.8%)

 

 

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