The Trump Administration has ended India’s preferential trade status, effective from June 5, 2019. This will impact the Indian exports worth $5.6 bn a year. It was the largest beneficiary of this programme in 2017, with $5.7 bn in imports to the US given duty-free. Traders say exports will get costlier, but the overall impact will be minimal.
President Donald Trump has ended India’s “developing” trade beneficiary status under the Preferential Trade Programme. The decision was made after determining that it has not assured the US that it will provide “equitable and reasonable access to its markets”.
To further continue this status will be decided by the newly elected commerce minister, Piyush Goyal. Amidst the 17th Lok Sabha election, New Delhi was giving its best to avoid this withdrawal. However, the US move was right on the face of the newly formed government, without any prior notice.
This will surely hinder India’s GDP. It was the fastest growing nation in the world, after dropping its GDP and losing it to China.
India and the new government must be prepared
This US action will be the first major challenge for PM Narendra Modi‘s newly elected government regarding its relations with the US. Seeing the recent rough decisions on trade by Trump, the government should be prepared for the worst to come, if any.
The subcontinent has been the largest beneficiary of this programme. It sold an estimated $6.3 billion worth of goods to the US under the programme in 2018.
Withdrawal of the zero tariffs programme can cut Indian trade’s growth. At least that is what everyone believes. Sure, introducing tariffs will make the goods costlier. But if the volume of goods remains the same, the overall impact may get distributed evenly. Thus, in turn, less impact will be faced.
Yet, to strengthen the ties with the US, it will have to take a key decision on the matters related to trade.