New Delhi: 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 the US. The duty hike would come into effect from August 4, the finance ministry said in a notification on Thursday.
With the US adopting protectionist policies and hiking import duties, a trade war like situation has emerged. The European Union has decided to levy higher import duties on a variety of US products and a similar action is being contemplated by China. In the notification, there is no mention of duty hike on motor cycle with engine capacity of over 800cc. India had submitted to the WTO a list of items on which it proposed to raise customs duty by up to 50%.
Deloitte India Partner MS Mani said, “On several products such as pulses the increase is very steep (30% to 70%), while for iron and steel products, the increase is at least 50% of the existing rate (from 15 to upwards of 22.5%). The increase in the customs duties on goods originating from the USA was expected, but the magnitude of the increases would have been unexpected. These increases would make the domestic products cheaper compared to imports and lead to domestic manufacturing as a corollary.”
The trade war
The decision to hike duties is in retaliation to the unilateral increase in tariff by the US on certain steel and aluminium products earlier this year which had tariff implication of $241 million on India. The duty hike by India would have an equivalent tariff implications for the US. On March 9, US President Donald Trump imposed heavy tariffs on imported steel and aluminium items, a move that has sparked fears of a global trade war.
The customs duty hike by India
- As per the notification, the import duty on chickpeas, chana and masur dal has been increased to 70% from 30%, while that on lentils has been hiked to 40% from 30%.
- Shelled almonds imported from the US will now attract import duty at Rs120/kg as against Rs100/kg earlier. Duty on artemia, a kind of shrimp, has been raised to 30%.
- Import duty on walnut in shell will attract customs duty at the rate of 120% as against 30% earlier. While apples will attract import duty of 75% as against 50% earlier.
- The duty on boric acid has been hiked to 17.50%, while the same on phosphoric acid has been raised to 20% from 10% each earlier.
- Import duty on diagnostic reagents has been doubled to to 20%, while binders for foundry moulds has been hiked to 17.5%.
- 27.50% flat rolled products on iron is raised to the pc from 15%, and flat rolled products on stainless steel to have 22.50% duty from 15% earlier.
- 25% for automobiles and earth moving equipment, SIM socket/other mechanical items (metal) for use in manufacture of cellular mobile phones, the duty has been hiked to the pc rate from 15% earlier.
- 50% As per the list India submitted to the WTO on Thursday, it had proposed to hike customs duty on specified motorcycles, which primarily include Harley Davidson and Triumph, to the pc rate.
The money game
- India has said the duty imposed by the US has affected steel exports by $198.6 million and aluminium shipments by $42.4 million.
- 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 has dragged the US to the WTO dispute settlement mechanism over imposition of import duties on steel and aluminium.