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Trump’s paper war with India

Trump on India

The unpredictable nature of US President Donald Trump’s speeches and announcements continues to shock many around the globe. It is not new that he proclaims policies – in all areas – anytime, from anywhere and however so he feels like.

It is not new that he came to power on the announcements that he would help local American business and manufacturers and bring some jobs and business back home to the United States. It was in that vein he had picked up an issue with India imposing tariffs on Harley Davidson motorbikes.

Harley-Davidson, Inc. (H-D), or Harley, is an American motorcycle manufacturer, founded in Milwaukee, Wisconsin in 1903. A major American motorcycle manufacturers to survive the Great Depression, the company has survived numerous ownership arrangements, subsidiary arrangements, and periods of poor economic to become one of the world’s largest motorcycle manufacturers and an iconic brand widely known for its loyal following.

India was imposing 100% tariffs on Harley imports into India and at President Trump’s intervention last year, India cut the tariffs on Harley to half – 50%. In January this year, president still was unhappy about the high tariff (in India) of 50% on Harley when in the US the tariffs on motorbikes’ imports was only 2.4%.

“Look at motorcycles as an example. (In) India, it was 100 per cent. I got them down to 50 per cent, just by talking for about two minutes. It’s still 50 per cent vs 2.4 per cent (on imported motorcycles to the US). Again, other than that, it’s a very fair deal,” the president had said.

Another item added to the list by President Trump was US Whiskey.

And now it is US paper and paper products.

Given the population, India is a big consumer of paper and paper products. It is in fact one of the world’s leading importers of paper, ranging from paper for writing, newsprint, coated paper, napkins, tissues and corrugated paper. It imports paper from the US as well which has caught the attention of the US President.

On Saturday, April 27, the President opened this new front in trade tensions with India and complained of  “big tariffs” charged by India on paper imports, while continuing to fight for yet lower tariff on Harley-Davidson motorbikes and Whisky.

Speaking at a re-election campaign gathering in the state of Wisconsin, President Trump said, “We charge other countries zero tariffs on foreign paper products…When Wisconsin companies exported abroad … China charged us big tariffs, India charged as big tariffs. Vietnam charged us massive tariffs.”

“Unfair,” he added, to boos.

Of course the President would talk of Harley as it is headquartered there in Wisconsin where Trump was speaking.

It’s American paper and paper products as well now on the list of the US President.

And Indian consumers of the American paper and paper products may well be at an advantage if Trump’s pressure tactics work.

America’s bilateral and multilateral trading relations have been a top priority for President Trump and he has vowed to renegotiate them, not sparring even close such as Canada, Japan and the European Union, to address what he sees as imbalances, which he has tended to measure mostly by the size of trade deficits.

The health and size of Indo-US trade

Going back to 1985, India imported American goods worth US$1641.9 million and exported goods to the US worth US$2294.7 million which produced a very small trade deficit of US$652.8 million. Looking at the figures for the year 2018, the story is quite different and the US President’s anxiety seems rightly placed.

In 2018, India imported American goods worth US$33120.1 million and exported goods to the US worth US$54407.5 million which produced a sizeable trade deficit of US$21287.4 million or more than US$ 21.2 billion.

In other words, in 2018 India had a trade surplus of US$ 21.2 billion which was  a measly US$ 652.8 million or just over US$ 0.6 billion in 1985.

That is precisely the reason the Trump administration is targeting India. To reverse some of this deficit,  it has imposed a tariff of 25% and 10% on steel and Aluminium from India.

It is also re-thinking  whether to terminate India’s eligibility for a zero-duty government programme.

The President intends to use the Reciprocal Trade Act – an incredible tool to bring foreign countries to the negotiating table and to get them to lower tariffs on US products and also to get rid of their trade barriers.

President Trump is on record to say that the Reciprocal Trade Act would help to solve the problem once and for all. “Whatever the tariff for a foreign country is, we place the same tariff on us.”

“What’s going to happen, I think, from a practical standpoint, is they won’t be charging us tariffs anymore. We’ll see. Or we’’ll charge them a lot. Tremendous amount of money.”                                                                                                                                                                                                                                                                         – staff writer

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