US President Donald Trump said on Friday that the United States would end its preferential trade treatment for India on June 5 after after determining that India has not assured the US of providing “equitable and reasonable access to its markets.”
Mr Trump had announced his intention to remove India as a beneficiary developing nation under the Generalized System of Preferences (GSP) programme, in early March.
“I have determined that India has not assured the US that it will provide equitable and reasonable access to its markets. Accordingly, it is appropriate to terminate India’s designation as a beneficiary developing country effective June 5, 2019”, Trump said in a statement on Friday.
Mr Trump has reportedly ignored the plea made by twenty-four US lawmakers sent on May 3 urging it not to terminate India’s access to the GSP as it will cost American businesses over $300 million in additional tariffs every year.
After Mr Trump’s statement, the Indian Commerce Ministry said the US decision was anticipated. The Ministry added, “India had offered resolution on significant US requests to find a mutually acceptable way forward. It is unfortunate that this did not find acceptance by the US.”
The measure is likely to hit some Indian exporters of products like textiles, jewelry, auto parts and agricultural products, and aggravate tensions between US and India, which, in Trump administration’s view, is an ally to counter China in the Indo-Pacific region.
On March 4, Mr Trump had announced that the US intends to terminate India’s designations as a beneficiary developing country under the GSP programme. The 60-day notice period ended on May 3.
To counter this, India has raised the prospect of higher import duties on more than 20 American goods should Trump remove India from the programme.
The GSP programme was formulated to allow developing countries to alleviate poverty through trade. About $5 billion of the $83.2 billion of goods that India sent to the US last year qualified for the tariff exemptions.
The programme allows nearly 2,000 products including auto components and textile material can enter the US duty-free if the beneficiary developing countries meet the eligibility criteria established by the US Congress.
India was the largest beneficiary of the programme in 2017 with $5.7 billion in imports to the US given duty-free status, according to a Congressional Research Service report issued in January.