The U.S. tariff war against India was resuscitated by President Joe Biden, who threatened to raise import tariffs on a range of imports, from shrimp and basmati rice to furniture and jewelry, in retaliation for New Delhi’s disrupting digital services Tax (DS) imposed on technology giants.
U.S. Trade Representative Katherine Tai announced the plan for a 25 percent increase in tariffs on 26 items from India on June 2, but said the increases will be suspended until December.
India began levying a two percent tax on the country’s revenues from foreign technology and e-commerce companies like Amazon, Facebook and Google as of April last year. It has been rejected by former President Donald Trump’s administration and Biden has taken over the baton.
The sales agent’s office said, “India’s DST is unreasonable or discriminatory and burdens or restricts US trade.”
The Office estimated that the increased taxes on the selected imports from India were equivalent to the taxes India levies on US companies under the DST.
“Estimates put the value of the DST to be paid by US corporations to India up to about $ 55 million a year for goods from India and estimates of the amount of taxes imposed by India.”
Other items at risk of increased tariffs include bamboo, shutters, cigarette paper, pearls, copper foil, and bedroom furniture.
At the start of the new phase of the trade wars, the Biden government also threatened to raise tariffs on imports from five other countries – Britain, Austria, Italy, Spain and Turkey – because of their summer time.
Tai explained the reason for the suspension of the increases for the six countries and said that this should aid the international negotiations on taxation.
“The US remains committed to reaching consensus on international tax issues through the OECD (Organization for Economic Co-operation and Development) and G20 processes. Today’s action provides time for these negotiations to move forward, while providing the opportunity to do so Maintain the introduction of tariffs. “
In the first phase of negotiations, the finance ministers of the G7, the major Western industrial powers, agreed on Saturday in London on a corporate tax rate of at least 15 percent to prevent companies from using loopholes in the law to avoid taxes on income in countries where they operate are.
The agreement will next take place at next month’s meeting of the G20 in Italy – a group of 19 developed and developing countries and the European Union.
India is a member of the G20.
The recent Biden volley opens a new front in the trade war between the two countries that began in 2018 when Trump imposed 25 percent tariffs on steel and aluminum imports from India.
In 2019, Trump withdrew special treatment for some Indian exports, mostly low-tech items and handicrafts, under the General System of Preferences (GSP), which exempted them from import duties.
New Delhi responded with higher tariffs on 28 US products, including walnuts and almonds.
Biden has not yet taken any steps to restore the APS facility for India.