‘We have to wait and see how Trump’s threat pans out’

US prez-elect has threatened to impose reciprocal tax on India

New Delhi

Imposing reciprocal duties violates global trade rules but one has to follow a "wait and watch" approach to US President-elect Donald Trump's remarks on imposing reciprocal tariffs, a senior official said on Wednesday.

US President-elect Donald Trump has said that India charges a lot of tariffs, reiterating his intention to impose reciprocal tariffs in retaliation for what New Delhi will impose on the import of certain American products.

Trump made these remarks on Tuesday and also said that India and Brazil were among countries that impose high tariffs on certain US products.

"It will be very difficult to decipher from one or two sentences which Mr Trump makes but if I understood from what he was saying. His main intent is that reciprocity will matter in future. So if you are putting a tax on Harley-Davidson (bikes) we will also put a tax on your motorbike exports. So from that point of view, this will be in clear violation of the WTO (World Trade Organization) norms but there are instances when Mr Trump has used measures like Section 232 of the Tariff Act which allows the US to take unilateral measures against countries on national security grounds.

"So one will have to wait and watch and see," Director General of Foreign Trade (DGF) Santosh Kumar Sarangi said here at CII's export competitiveness event.

He said that there are many areas where India has tariff peaks but the country does not necessarily export those to the US. For example, India has high customs duties on a number of agri goods but they are not necessarily exported to America.

"So if the US uses reciprocity and imposes taxes on that, it will not harm us in a major way but there could be a few items where this reciprocal principle thing might impact us," he said.

Further, he added, "So one has to wait and watch, how it is panning out and the fine print of this will be available only after they undergo a process like they have a process like they have a process where the USTR (US Trade Representative) examines, investigates and recommends an action. Before guessing the impact, one will have to wait and watch as to which are the kind of products that they are looking at." 

High interest rates big deterrent for MSME 

exporters: DGFT

The country's high interest rates are a big deterrent for exporters community and the commerce ministry is working with its finance counterpart to help them at this front, Sarangi said on Wednesday. He said that the department of commerce has been "struggling" to convince the finance ministry regarding the relevance of the Interest Equalisation Scheme and the extent to which it is maintaining manufacturing competitiveness.

He said there are many studies which suggest that very high collateral demand by financial institutions is a big deterrent for MSMEs to access institutional finance and that deters them from getting into export market.