Days after the US cut off India’s duty-free access to the American market under its largest preferential trade scheme, the Generalized System of Preferences (GSP), official figures from Washington DC showed that its trade deficit with the country has fallen over the past two years, slipping to $21.3 billion in 2018. In 2017, the US’ trade deficit with India was $22.3 billion, down from $24.4 billion in the previous year.
Prime Minister Narendra Modi is expected to point this out to US President Donald Trump in a letter on the matter soon, Business Standard has learnt.
The latest figure, released by the United States Census Bureau, under the Department of Commerce, on Thursday, comes three days after Trump notified US Congress of his intent to remove India from the list of beneficiaries of the GSP programme for not granting American producers “reasonable access” to its markets. Senior Indian government officials, however, have argued that the dominance of US firms in several sectors showed that India had suitably opened up its market to foreign industry.
The US' trade deficit with India, an issue raised Trump several times, has also served as the justification for the country imposing a 25 per cent extra levy on steel and 10 per cent on aluminium products, and threatening to arbitrarily increase tariffs on major imports from here.
Despite increased protectionism through higher tariffs on imports and easier export norms, the Trump administration has not been able to rein in the US' ballooning global trade deficit, that jumped to a record $878 billion in 2018, from $807 billion in 2017. Its global trade deficit has increased for the third consecutive year.
The US' trade deficit with China also hit a record $419 billion, despite a series of tariffs the administration imposed on Chinese goods to decrease reliance on imports.
The US had record exports to 53 countries in 2018, led by Mexico ($265.0 billion), Japan ($75.0 billion), and the United Kingdom ($66.2 billion), according to the US Federal government. However, it also had record imports from 60 countries in 2018, led by China ($539.5 billion), Mexico ($346.5 billion), and Germany ($125.9 billion).
GSP drama continues
India has been the largest beneficiary under the GSP scheme, the largest and oldest US trade preference programme designed to promote economic development by allowing duty-free entry for thousands of products, mostly from developing nations. India exported goods worth $5.6 billion under the GSP last year. But the Indian government has downplayed the impact of Trump's decision, saying that the country has received only $190 million worth of benefits under the scheme.
Though India is not keen to engage the US in a tit-for-tat show, the government on April 1 will finally impose higher duties on 29 key imports from the country, senior government officials said. This roll-out has been deferred six times.
"We do not believe that a knee-jerk reaction is the best option. We are internally reviewing our stance and will reply in time. The US has notified that benefits will lapse after a 60-day period," an official said.