Indian Government Postpones Retaliatory Duties Against U.S. by 45 Days

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India’s trade tiff with the United States has all the hallmarks of a potential political battle — for India, at least. With general elections not too far away, it looks like Narendra Modi’s government does not want to really stir the pot, lest there is some fallout in the domestic political scene.

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That could be one of the reasons why the Indian government has chosen to defer a tit-for-tat duty on the import of over two dozen products from India, including certain flat-rolled stainless steel products. It was supposed to come into effect Aug. 8, but now the new date is Sept. 18.

Trade between India and the U.S. has been buffeted by many problems in the past few years. The hike in import duties on Indian goods coming into the U.S. a few months ago was one more such hiccup.

But the ruling dispensation here does not seem to want to take any chances. So, in a renewed effort to resolve the differences between the two countries, India’s Commerce Ministry has requested the Finance Ministry to extend the implementation of higher duties by 45 days.

The Trump administration had decided to hike the import duties on certain steel and aluminum products, not only from India but other countries, such as China, too.

Though the U.S. Trade Representative’s office had two rounds of dialogue with Indian officials, a settlement was not reached. Now, by deferring the retaliatory hike, the Indian government is hoping the issue can be resolved in the next 45 days.

On India’s list of increased duties are 29 products, which include walnuts, almonds, pulses, apples and non-iron.

Duty on flat-rolled iron products has been raised to 27.50% from 15%, while certain flat-rolled stainless steel products will now attract 22.50% duty (compared with the earlier 15%).

Besides the domestic political fallout, the Indian government may also be a bit apprehensive of the White House’s response and the potential for further targeted actions.

India is not really on the same plane as China vis-à-vis such import tariffs; Washington looks at New Delhi very differently than it does Beijing. For one, unlike China, India is not a major exporter of steel and aluminum to the U.S. In 2017, the U.S. accounted for about 2% of India’s steel exports.

Things between India and the U.S. are proceeding at a different level, evident from the fact that last week the U.S. Department of Commerce granted New Delhi a special status that gives the emerging market an automatic waiver for exports of certain military and dual-use technologies (much to the consternation of the Chinese). That could be another reason why the Indians have decided to hold off on enacting the retaliatory duties.

Steel Supplies Dumped in India

Meanwhile, some Indian newspaper reports have said following the duty hike, some countries like China and South Korea have stepped up the dumping of steel in India.

They are said to be diverting supplies from the U.S. and the European Union in massive volumes to beat the impact of a global tariff war. Quoting official data, the report said it suggested steel supplies from China, the world’s largest steel producer, surged to 362,000 tons in the April-June period, up 67% sequentially from the 217,000 tons in the previous quarter.

As Japan and Korea enjoy duty relief under their respective free-trade agreements with India, the imports from these countries are 10% cheaper than domestic steel.

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Importantly, while the combined steel exports by China, Japan and South Korea to the U.S. dropped 17%, or by 241,000 tons, in the April-June period vis-à-vis the previous quarter, their supplies to India rose by 459,000 tons, up 45% from the March quarter. This, said the report, clearly showed that Asian steelmakers were rerouting supplies, meant for the US and other nations, to India.

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