Why in news?
- India has recently hiked duty on 29 items imported from the US.
- The retaliatory measures by India and other countries to US's tariffs are indicative of an expanding trade war.
What is India's move?
- Earlier India told WTO of its plans to increase the customs duty on 30 products imported from the US.
- Motorcycles with internal combustion engine capacity over 800 cc was in the list.
- However, India has now left out such motorcycles.
- It has slapped tariffs as high as 50% on a list of 29 goods imported from the U.S.
- Some of them are lentils, boric acid, fresh apples and shelled almonds.
What is India's stance?
- India’s notification to the WTO says that U.S. tariffs on steel and aluminium would cost India $241 million.
- Thus, the tariffs imposed on the U.S. would bring in a commensurate amount.
- It has also indicated its preference to deal with the issue through dialogue.
- It has stated clearly that it did not prefer “measures and counter-measures”.
What are the other recent developments?
- In the recent period, China and the US have imposed various rounds of tariffs on each other.
- It all began when US unveiled tariffs to discourage the import of steel and aluminium into the country.
- The latest round of tariffs imposed by the U.S. on Chinese goods will be the highest in terms of the value of goods.
- It will now affect Chinese goods worth $450 billion.
- Notably, total Chinese imports into the U.S. last year were worth around $500 billion.
- The European Union also joined the trade war recently, imposing tariffs on $3.3 billion of American goods.
What will the implications be?
- Investors may be beginning to take threats of a trade war more seriously.
- The fact is that all sides engaged in a trade war eventually lose.
- The longer it goes on, the greater the cost.
- This is because growth slows down under the increasing burden of taxes.
- The only gainers in a trade war will be special interest groups, such as the U.S. steel industry.
- Even retaliatory tariffs may only perpetuate the vicious negative-sum game.
- It may not contribute to bringing the war to an end.
- Global powers must try their best to bring an end to the ongoing trade war before it gets out of hand.
Source: The Hindu, Indian Express
