India has made at least two offers, one as recently as this month, to try to address U.S. trade complaints, but the Trump administration has rejected them as inadequate. | Win McNamee/Getty Images trade India could be next on Trump’s investigate-and-tariff hit list

India could soon become the next target of President Donald Trump’s aggressive policy as the administration gets ready to use tariffs and other sticks to bend or break global trading partners.

Already, the U.S. has expelled the nation from a special program that reduces tariffs on a range of imports from developing countries. The next step is expected to be launching a full-blown investigation into India’s practices, just as the U.S. did with China last year.


The move comes despite President Donald Trump’s warm embrace (in some cases, literally) of Prime Minister Narendra Modi, who has just emerged from a national election with a stronger grasp on power.

“The challenge is you have both administrations taking a fairly strong stance,” said Nisha Biswal, president of the U.S.-India Business Council. “Whether there is space to negotiate some compromises is an open question.”

The U.S. has blamed India for blocking access for American exports ranging from dairy products to medical devices, as well as raising tariffs on tech products. On March 4, Trump began steps to terminate the country's long-time trade benefits under the Generalized System of Preferences program — a system that waives U.S. import duties on thousands of goods.

India has made at least two offers, one as recently as this month, to try to address U.S. complaints, but the administration has rejected them as inadequate.

“The decision may come despite improved market access offers from India in recent weeks — [the office of the U.S. Trade Representative] apparently has no interest in negotiating,” said an industry source close to issue.

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The lack of progress has built momentum for a so-called Section 301 investigation, the same action that the U.S. took against China, said two sources briefed on internal discussions.

Under Section 301 of the Trade Act of 1974, the administration can take action, including tariffs, to counter another nation’s policies that restrict U.S. commerce. Trump has invoked that previously little-used provision to impose or threaten tariffs on virtually all goods imported from China.

“What happened with China is a road map for what you could see in India,” said one business source close to the issue.

Another source said frustration in the administration “is very deep.” The possibility of a Section 301 inquiry will become more real in the summer months if the Indian government doesn’t take a major step in response to U.S. concerns.

Elections this month aren’t likely to change Indian government policy drastically. Modi was sworn in on Thursday and recently appointed his cabinet, but there are expectations that he will be unrelenting on policies aimed at boosting India’s manufacturing base.

Modi has generally welcomed foreign investment but last year approved an increase on customs duties on a wide range of imports — including automobiles, footwear and cell phones — to address India’s current account deficit and promote a “Make in India” initiative.

Trump this month congratulated Modi on his landslide victory and both leaders agreed to meet on the sidelines of the G-20 summit in Japan in late June.

“He is a friend of mine,” Trump told reporters last month. “We have a very good relationship with India.”

Still, Trump has labeled India the “tariff king” and repeatedly criticized the country’s tariff policies. He has fixated in particular on New Delhi’s tariff on U.S.-built motorcycles.

“When we send a motorcycle to India, it’s a hundred-percent tariff. They charge 100 percent. When India sends a motorcycle to us, we brilliantly charge them nothing,” he said in March.

India actually imposes a 50 percent tariff on imports of U.S. motorcycles like Harley-Davidson, which have found minimal demand among Indian consumers who prefer cheaper, more fuel-efficient models.

Although India has opened up to services companies like tech firms in recent decades, it still has stiff duties on numerous imports.

“Many of India’s bound tariff rates on agricultural products are among the highest in the world, averaging 113.5 percent and ranging as high as 300 percent,” the U.S. Trade Representative‘s office said in a recent report.

“India has arguably been more protectionist than the Trump administration in the past two years,” said Aman Thakker, a research associate specializing in India’s economy at the Center for Strategic and International Studies.

Although many of India’s actions have been aimed at closing the country’s trade deficit with China, they have raised alarm in the U.S., where companies have had a tempestuous trade relationship with India that predates the Trump administration.

Modi “recognizes that India needs to develop a strong manufacturing base and the easy way to do that is protect these industries,” Thakker said.

The next step in the worsening trade relations could play out in coming weeks. The administration announced last Friday it would remove India from the GSP program. The move comes after the U.S. temporarily delayed the decision because of the country’s recent elections.

For its part, New Delhi has defended its approach to easing trade tensions. Indian officials last month said they had submitted what they thought was an “attractive” package responding to U.S. complaints. If the U.S. formally revokes India’s GSP status, the Indian government may decide to impose retaliatory duties in response to U.S. penalties on steel and aluminum, which it has held back from doing so far.

The move will raise duties on about $5 billion to $6 billion worth of goods the U.S. imports from India — or slightly more than 10 percent of India's total exports to the U.S. of $54 billion last year.

U.S. businesses that support the program said it will impose more than $300 million in additional tariffs on U.S. businesses that import products from India.

“American importers will pay more, while some American exporters will continue to face current market access barriers in India and others, including farmers, are very likely to be subject to new retaliatory tariffs,” said Dan Anthony, executive director for the Coalition for GSP.

A group of U.S. businesses that pressed for action against India called the decision an “unfortunate reflection“ of the state of U.S.-India trade relations.

“India needs to engage urgently and seriously to eliminate barriers and improve our bilateral trade relations,” warned Brian Pomper, executive director of the Alliance for Fair Trade with India.

For now, India is showing restraint and downplayed the U.S. decision.

India’s Ministry of Commerce said the action was one of a number of “ongoing issues which get resolved mutually from time to time.“

“We view this issue as a part of this regular process and will continue to build on our strong ties with the US, both economic and people-to-people,” the ministry said in a statement.

Despite U.S. market access complaints, Indian officials have highlighted a major increase in U.S. exports to India, which rose nearly 30 percent from 2017 to 2018.

Growth in U.S. exports of oil, gas, commercial aircraft and poultry have corresponded with a decrease in Indian exports to the U.S., which means the U.S.’ current $21.3 billion trade deficit it expected to decrease even more in 2019, one Indian official told reporters last month.

“You don’t have a market access issue, the data shows that,” the official said.

But even with an increase in other areas of trade, there remains “consistent frustration” in the administration with India’s trade restrictions, said one former White House official.

Cutting India’s benefits under GSP could be a test to see if Modi’s government is willing to address U.S. demands beyond its previous offers.

“Everyone was pretty fed up,” said the official. “I would be surprised if that issue gets resolved.”