Trump ejects India from $5.6bn tariff deal over ‘negative’ trade barriers

India’s prime minister, Narendra Modi, greets US president Donald Trump in 2017.

India’s prime minister, Narendra Modi, greets US president Donald Trump in 2017. Trump has scrapped preferential trade terms for India as well as Turkey. Photograph: Kevin Lamarque/Reuters

US president Donald Trump looked set to open a new front in his trade wars on Monday with a plan to end preferential trade treatment for India that allows duty-free entry for $5.6bn worth of the country’s exports to the United States.

Trump, who has vowed to cut US trade deficits, has repeatedly called out India for its high tariffs. The US Trade Representative’s Office accused Indiaof bringing in a “wide array of trade barriers that create serious negative effects on United States commerce”.

Trump said in a letter to congressional leaders: “I am taking this step because, after intensive engagement between the United States and the government of India, I have determined that India has not assured the United States that it will provide equitable and reasonable access to the markets of India.”

US trade officials said scrapping the concessions would take at least 60 days after notifications to Congress and the Indian government.

India is the world’s largest beneficiary of the Generalized System of Preferences (GSP) program and ending its participation would be the strongest punitive action for the South Asian nation since Trump took office in 2017.

The US Trade Representative’s Office said removing India from the GSP program would be done through a presidential proclamation.

India said it did not plan to impose retaliatory tariffs on US goods, saying the preferential terms bring “actual benefit” of just $250m a year. Trade official Anup Wadhawan said on Tuesday the two countries had been working on a trade package to address each other’s concerns.

Trade ties with the US were hurt after India unveiled new rules on e-commerce limiting the way internet retail giants Amazon and Walmart Inc-backed Flipkart do business.

The e-commerce rules followed a drive by New Delhi to force global card payments companies such as Mastercard and Visa to move their data to India and higher tariffs on electronic products and smartphones.

India’s top GSP exports to the United States in 2017 included motor vehicle parts, ferro alloys, precious metal jewellery, building stone, insulated cables and wires, said business group the Confederation of Indian Industry, which had lobbied against the withdrawal of preferential treatment.

Most of the exports were intermediate goods not produced in the US because they were low in the manufacturing value chain, it added.

The US goods and services trade deficit with India was $27.3bn in 2017, the US Trade Representative’s Office said.

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