President Joe Biden has raised the US tariff war against India and is threatening to increase import duties on a range of imports. This involves items like prawns and Basmati rice to furniture and jewelry. As it has been reported, it comes in response to New Delhi imposing Digital Services Tax (DS) on tech giants in US. The other items that are reportedly threatened with increased duties include bamboo, window shutters, cigarette papers, pearl, copper foil and bedroom furniture
Katherine Tai, US Trade Representative, on June 2, announced the plan for the 25 per cent increase in the tariffs on 26 items from India. Tai has further stated that the hikes will be on hold till December.
As previously reported, India, last year in April had imposed a two per cent tax on earnings in the country by foreign technology and e-commerce companies. Thus tech giants like Amazon, Facebook and Google were subjected to such 2 percent levy which had made it arduous for the business to operate in India. The move by the Indian authorities was vehemently opposed by the administration of former US President Donald Trump too.
The Trade Representative’s Office had stated that “India’s DST is unreasonable or discriminatory and burdens or restricts US commerce.”
The Trade Representative’s Office had estimated that in order to equalize the taxes imposed by India on the e-commerce giant, the increased taxes on the selected imports from India will equal the taxes India assesses on the US companies under the DST.
In a statement, it maintained that “Estimates indicate that the value of the DST payable by US-based company groups to India will be up to approximately $55 million per year. The level of trade covered by the action takes into account estimates of the number of tariffs to be collected on goods of India and the estimates of the amount of taxes assessed by India.”
Is India the only country suffering US wrath?
Biden administration, which has taken the baton from the Trump administration has also threatened to increase tariffs on imports from five other countries. These countries are namely, the UK, Austria, Italy, Spain and Turkey over their DST.
However, trying to keep a diplomatic and negotiating tone, trade representative’s office stated that “The US remains committed to reaching a consensus on international tax issues through the OECD (Organization for Economic Cooperation and Development) and G20 processes. Today’s actions provide time for those negotiations to continue to make progress while maintaining the option of imposing tariff.” As it has been reported, the negotiation has been ongoing at various levels and the recent meeting comes as a part of the second phase of the negotiations. In the first round of the negotiation, the Finance Ministers of the G7, the major western industrial powers, had met in London and had agreed to a minimum 15 per cent corporate tax rate to prevent companies using legal loopholes to avoid paying taxes on incomes in countries where they operate.
The negotiations will now go to the next level in the next month’s meeting in Italy of the G20. G20 is a group of 19 countries, industrialized and developing, and the European Union. India too is a member of the G20 nations.
According to reports, Trump had withdrawn the special treatment for some Indian exports in 2019 citing that mostly low-tech items and handicrafts, under the General System of Preferences (GSP) that exempted them from import duties. New Delhi retaliated with higher tariffs on 28 US products that included walnuts and almonds.