Modi assured Trump last year India would reduce tariffs on US goods 'substantially'

By Rajiv Shah
Even as the United States declared it was withdrawing its “preferential trade status” accorded to India, facts suggest, Prime Minister Narendra Modi had “assured” US president Donald Trump last year he would work on going soft on “very high tariffs” imposed on American products coming to India. Addressing a White House media conference on October 1, 2018, Trump had said, I had “spoken to Prime Minister Modi, and he is going to reduce them (tariffs) quite substantially.”
Talking to media, Trump – who announced a new trade deal with neighbouring Mexico and Canada, which abrogated the North American Free Trade Agreement (NAFTA) with the two countries as it allegedly was against US interests leading a loss of billions of dollars – had identified India as one of the countries with whom a new trade deal was under negotiation.
Calling India “tariff king” imposing up to 100 per cent duty on certain goods imported from the US, and expecting a positive response from India, Trump, however, had opined that he was sure Modi would oblige him and reduce the tariff .“My relationship with India is great, with Prime Minister Modi is great, and they are going to start doing a lot. They have already called us to make a deal, we didn't even call them”, the US president had said.
At the media briefing, which lasted for more than one hour, Trump had further said, “India, which is the tariff king… they called us, and they say they want to start negotiations immediately”. The reason he had advanced was, India wanted to keep him happy. “They have to keep us happy, because they understand, they have been wise to keep us happy”, he had added.
Trump had continued, “India charges tariffs of 100 per cent. And if we want to put a tariff of 25 per cent, people from Congress will call, but that's not free trade”, adding, “India charges tremendous tariffs. When we send Harley Davidsons motorcycles, other things to India, they charge very, very high tariffs. And I have spoken to Prime Minister Modi, and he is going to reduce them quite substantially. Nobody ever spoke to these people. He said nobody ever spoke to me.”
Blaming past presidents of his country for this, Trump had said, “I am not trying to be kind of overly dramatic. We have had presidents of the United States and trade representatives; they never spoke to India… They charge us whatever they want… India has a very, very high tariff, they really charge tremendously high tariffs.”

Specifically referring to the Harley Davidson motorcycles, Trump had said, “So you send a motorcycle to India, it's 100 per cent tariff, now that's so high that it is like a barrier, in other words, who is going to buy it? It costs you so much. Now they have already reduced it substantially and it is still too high.”
Trump had ended by stating, “My relationship with India is great, with Prime Minister Modi is great, and they are going to start doing a lot. They have already called us to make a deal, we didn't even call them, they called us to make a deal, which is like shocking to people.”

Options before India

While it is not known if Modi would now negotiate the US following the Trump administration ending India’s classification as a beneficiary developing nation under the Generalised System of Preference (GSP) trade programme, indications are, Indian industry would suffer substantially because of the latest development. US said it took the measure to end India GPS status after “ascertaining” that India has not assured it would provide “fair” and “reasonable” access to its markets.
GPS is the largest and oldest US trade preference programme designed to encourage developing countries by allowing duty-free entry for thousands of products from selected beneficiary nations. Ending India’s beneficiary status, Trump said, “I have determined that India has not assured the US that it will provide equitable and reasonable access to its markets. Accordingly, it is appropriate to terminate India’s designation as a beneficiary developing country effective June 5, 2019.”
The US administration had put India on a 60-day notice period, which ended on May 3. Under the GSP programme, nearly 2,000 products, including auto components and textile materials, can enter the US duty-free. India was the largest beneficiary of the programme in 2017 with $ 5.7 billion in imports to the US given duty-free status.
Meanwhile, in what is being termed as a tame response following the Trump decision to withdraw the preferential status, the Modi government said it would “continue to seek to build strong economic ties with US”. Describing the US announcement "unfortunate", a statement from the Union Ministry of Commerce and Industry said, "India, like the US and other nations shall always uphold its national interest in these matters."