US President Donald Trump said on Monday that he intend to terminate the preferential trade treatment for India that allows $5.6 billion worth of Indian exports duty free entry to the United States.
Trump, who has vowed to cut US trade deficits, has repeatedly called out India for its high tariffs.
In a letter to the congressional leaders Trump said: “I am taking this step because, after intensive engagement between the United States and the government of India, I have determined that India has not assured the United States that it will provide equitable and reasonable access to the markets of India.”
The US Trade Representative’s Office said removing India from the Generalized System of Preferences (GSP) programme would not take effect for at least 60 days after the notifications to Congress and Indian Government and it will be enacted by a presidential proclamation.
Anup Wadhawan said the withdrawal of the Generalised System of Preferences (GSP) for Indian products would have limited impact. The two countries had been working on a trade package to address each other’s concerns, he said.
India’s exports of farm, marine and handicraft products to the United States could be hit. “We fear that our labour-intensive exports of agriculture, marine and handicraft products to the US would be hit hard,” Ajay Sahai, director general of the Federation of Indian Export Organisations, told Reuters.
India is the world’s largest beneficiary of the GSP program and ending its participation would be the strongest punitive action for India since Trump took office in 2017.
“India has implemented a wide array of trade barriers that create serious negative effects on United States commerce,” the USTR said.
“Despite intensive engagement, India has failed to take the necessary steps to meet the GSP criterion.”
India’s top GSP exports to the United States in 2017 included motor vehicle parts, ferro alloys, precious metal jewellery, building stone, insulated cables and wires, said business grouping the Confederation of Indian Industry, which had lobbied against the withdrawal of preferential treatment.
The US goods and services trade deficit with India was $27.3 billion in 2017, the US Trade Representative’s Office said.