India reacted calmly to news president Donald Trump will likely revoke the preferential status accorded it by the United States that allows the duty-free entry for $5.6 billion worth Indian exports into the U.S.
India does not plan to impose retaliatory tariffs on U.S goods, said a statement from the office of prime minister Narendra Modi. It also said the withdrawal of preferential status will have a limited impact on its economy.
The most serious rift between India and the U.S. in decades was ignited by Trump, who said yesterday he intends to end India's preferential trade treatment.
"I am providing notice of my intent to terminate the designation of India as a beneficiary developing country under the Generalized System of Preferences (GSP) program," wrote Trump in a letter to congressional leaders.
"I am taking this step because, after the intensive engagement between the United States and the Government of India, I have determined that India has not assured the United States that it will provide equitable and reasonable access to the markets of India."
Trump has vowed to reduce U.S. trade deficits, has repeatedly criticized India for its high tariff rates on U.S. exports. The U.S. goods and services trade deficit with India stood at $27.3 billion in 2017, according to the U.S. Trade Representative's Office.
Analysts noted that ending India's participation in the GSP will be the strongest punitive action against India by Trump since he took office in 2017.
"I will continue to assess whether the Government of India is providing equitable and reasonable access to its markets, in accordance with the GSP eligibility criteria," he said.
Analysts said this blatant attempt to bully India, which is similar to Trump's approach to China, will make no progress as India can well afford the loss of $5.6 billion.
Anup Wadhawan. Special Secretary at the Department of Commerce, said both countries are working on a trade package to address each other's concerns.
The U.S. Trade Representative's Office said removing India from the GSP program won't take effect for at least 60 days after the notifications.
India clarified that GSP brings "actual benefit" of just $250 million a year. What India fears, however, is Trump's expanding his trade war to include other barriers to trade.
One Indian official said GSP is more symbolic of the strategic relationship, not in value terms.
In 2017, India's top GSP exports to the U.S. included motor vehicle parts, ferroalloys, precious metal jewelry, and insulated cables and wires, according to the Confederation of Indian Industry.
