Second front to trade war: U.S. revokes India’s preferential trade status increasing tariffs by $5.6 billion and more expected

President Donald Trump has revoked Indias preferential trade status worth $5.6 billion. This affects manufacturers of auto spare parts and casings for wires that are too low on the value chain for American manufacturers to make them in the U.S.  Trump wrote that he is taking the step because “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 U.S. Generalized System of Preferences program, known as GSP, provides duty-free entry into the United States for more than 3,500products from more than 100 countries. India is the largest beneficiary of the program, with GSP imports including thousands of products and totaling $5.7 billion in 2017.

But the blanket removal of the GSP scheme for India means that about 1,900 products exported by the country to the US will be hit. “Popular items that India exports to the US under the GSP programme includes many intermediary products such as mechanical spare parts, ferroalloys, food products, gems and jewelry, textile products, electronic products like motors, wires

India has one of the fastest-growing economies, with top exports to the U.S. including precious metals and diamonds, mineral fuels and aircraft. “India is a very high-tariff nation. They charge us a lot. When we send a motorcycle to India, it’s 100 percent tariff. They charge 100 percent. When India sends a motorcycle to us, we brilliantly charge them nothing,” Trump said.

The U.S. says its goods and services trade deficit with India is more than $27 billion. Contributing to the imbalance are India’s import licensing requirements (including for motorcycles), export subsidy programs and lack of transparency in its laws regulating trade.