As a matter of fact, America simply wants its supremacy in global trade, if you ask me a simple question what is the compelling reason that led Washington to increase tariff by 25% on steel import and by 10% on Aluminum imports…. I would answer it simply as Supremacy..!! This phenomenon bites Washington every now and then. Although Trump imposed tariff citing national security as a reason, however it’s too tough to understand this reason. This tariff was imposed recently in March 2018 after this, India repeatedly asked US to exempt these tariffs, as India never posed any security threat to US, but to no avail. Later India took this matter to WTO dispute settlement mechanism. Notably this US move came when India is all set to beat Japan in steel production capacity and to replace Japan’s 2nd rank just to stand after China.

Now India has also decided to increase import tariff of 30 items being imported from US amounting to $240 million, this can be seen as a retaliation move by India against the US move. Most economists suggest that it would be too immature to view this as a trade war between two countries. However if the trend continues, definitely it would be a trade war. Important point to note here is that removal of concession on US import would result in collection of $240 million which is very much equivalent to the $241 million which is the duty increased due to US actions, this almost nullifies the India’s loss.

India’s bold retaliatory measure against the US came just after the Commerce minister Suresh Prabhu return from US. Trump’s trade policy is majorly based on America first, aimed at boosting the competitiveness of the manufacturing industries and jobs in the US. US is the world’s second biggest consumer of Steel and it is the third biggest consumer of Aluminum and to note it’s trade deficit is also quite huge with other economies including India. It is worth mentioning that US trade deficit with India started declining in 2017 which was steady for long, a good sign for Indian trade and commerce. India’s exports of steel and Aluminum products to America stood at about $1.5 billion every year. Its exports to the US in 2016-17 stood at $42.21 billion, while imports were $22.3 billion.

India has notified WTO the proposed increase in custom duty, which is raised up to 50%, however in May 2018, India informed WTO with a proposal to raise the duties by up to 100% on 20 products.

“India reserves its right to further suspend substantially equivalent concessions and other obligations based on the trade impact resulting from the application of the measures of the US,” it added.

The country has proposed this move under the WTOs Agreement on Safeguards.

Almost same measures have been taken by European Union and China also against US. On June 16th , Beijing announced higher duties on agricultural products, automobiles, and seafood imported from the US. Higher tariffs on another 114 items, including chemicals, medical equipment, and energy products, will come into effect later, which simply means that Americans would now have to pay more price for imported goods, which may include Whisky and denims, widely consumed in US.

Although the nature of trade war between India and US is not of that size which is in between US and China, still may lead to the frictions between two nations. As an Indian citizen, we would welcome this step by the current NDA government, this would have various long term positive effects on Indian economy and will also play a major role in maintaining our foreign reserve.