US’s latest tariff threat is illogical. India should challenge it, but offer no concessions under pressure.
Trump’s Iran war has cost Americans about $100bn already – twice the estimated real earnings from his reciprocal tariffs. While it’s true that US pocketed an additional $214bn from tariffs, it’s got to refund some $165bn, since Scotus deemed those tariffs illegal in Feb. Yet, Trump is unfazed. He loves tariffs so much that he’s trying to hit dozens of trade partners with new duties, in late June or early July. Which is, coincidentally, close to the July 24 expiry date of his 10% universal tariff.
Knowing this, what should we make of the US move to hit India with a new 12.5% tariff, for allegedly not doing enough to prevent trade in goods made with forced labour? To be clear, US is not saying that India uses forced labour to make US-destined goods. Rather, it’s arguing that India itself buys goods made elsewhere with forced labour. How is it America’s problem? It isn’t, but for the sake of tariffs, Trump’s admin is using it as a fig leaf. US trade representative Jamieson Greer has said such imports hurt American workers, who are “forced to compete globally on an unlevel playing field”.
This is stretching Section 301 of the US Trade Act – under which India and 53 other countries stand accused. The law was meant to investigate unfair policies and practices by other countries that hurt US commerce. For example, IPR practices in China. But wagging a finger at EU, India, Canada, etc, for the goods they buy is taking unilateralism too far. It’s also hypocritical, because rare earths, some other metals, coffee, pharmaceuticals, aircraft parts, etc, remain exempt from tariffs related to forced labour. Hence, exploitation of, say, cobalt miners, is fine if it suits US.
The 12.5% tariff hasn’t been imposed yet. India can request a hearing, and it should. But US intent is already clear. It’s oddly timed when the US-India trade deal is in a “commas and full stops phase”, per commerce minister Piyush Goyal. It’s more than likely that US is using this tariff threat to get some more concessions from India. But India should stand firm. It’s better to pay a tariff than to succumb to US blackmail. In fact, the two negotiations should not be mixed. So far, India has said it “remains engaged” with US on both issues – Section 301 and the trade deal. It should stay the course.
Disclaimer
Views expressed above are the author’s own.
