Trump imposed 10% tariff on India, no major impact seen. page 23New Delhi: The US Trade Representative has announced an additional 10% tariff on India and several other countries for allowing import of goods using forced labour.The “permanent” levy, which was in line with expectations following the Section 301 investigation, will replace a “temporary” 10% import duty from Friday and is unlikely to have a major impact.Although lower than the proposed 12.5% for India, exports from the country face additional threat due to a second investigation against more than a dozen countries for structural overcapacity. news networkIndian oil basket rose 11% in a day to $ 103 per barrel. page 20New Delhi: Indian basket of crude oil jumped 11% in a day to $103.33 a barrel on Thursday, its highest in two months, amid disruptions caused by the closure of the Strait of Hormuz and the targeting of shipping vessels in the Red Sea by the Houthi militia.Global benchmark Brent crude, which crossed the $100 per barrel mark on Thursday, fell marginally to $97.08 (8.30 pm) on Friday.International FOB (free-on-board) prices of petrol and diesel have also increased, increasing the possibility of under-recovery for oil marketing companies if retail pump prices remain unchanged.India’s retail petrol and diesel prices are linked to international product prices as it imports about 90% of its crude oil requirement. International FOB prices are generally higher than crude oil prices because they include refining costs, freight and marketing margins.While the international FOB price of diesel averaged $129.8 per barrel in July, down from $120 in June, the corresponding price of petrol has averaged $103.3 this month, though it is down from $107.8 in June.Oil marketing companies were under-recovering more than Rs 1,000 crore per day in May, when the Indian basket of crude oil – the weighted average price representing the actual mix of crude oil imported by India – averaged more than $110 a barrel.The government later increased petrol and diesel prices by about Rs 7.5 per liter over a few days in May, partially reducing the under-recovery.Separately, citing a notice posted on the US Treasury Department website on Friday, Reuters reported that the US will allow some transactions involving Lukoil International GmbH to continue until August 22.India had questioned the investigation, arguing that the unilateral move was inappropriate and that India has rules to investigate the use of forced labour. But even while the investigation was ongoing, the Directorate General of Foreign Trade modified the rules by adopting the ILO definition and providing for investigation under the foreign trade policy, which USTR incorporates when setting tariffs.As a result, India along with Bangladesh, Pakistan, Sri Lanka, UK, Cambodia, Canada, Indonesia, Malaysia and Mexico are among the 17 countries that will face a 10% levy, while around 40 countries will face a 12.5% tax. The US agency said the EU, Taiwan, Japan, South Korea and Switzerland would be subject to tariffs of 10% or 12.5% after adjusting the MFN rate.It says there are some product-specific discounts. “The US will now have to pay MFN tariffs and 10% Section 301 duty on about 70% of India’s exports, while Section 232 products (auto parts, certain metal products) will face 25%-50% tariffs,” trade research body GTRI said. The government has not yet commented on the decision, but officials were expecting the outcome.“The 10% US tariff on Indian exports under the forced labor investigation lacks a credible factual basis. The US has not provided evidence that India imports goods made with forced labour. In response to US concerns, India has already amended its foreign trade policy to ban imports of goods produced using forced or compulsory labour, GTRI founder Ajay Srivastava said in a note.“Indian law also prohibits forced labor in domestic production through constitutional guarantees and labor laws. The tariffs therefore serve primarily as a mechanism to preserve the Trump Administration’s tariff wall following the expiration of the temporary Section 122 tariffs, and not as a targeted response to a proven forced labor problem tied to India,” Srivastava said.They are now keeping a close eye on a second investigation focused on structural excess capacity in 16 countries, including India. Analysts and government officials believe this will be the starting point for negotiations for a trade deal with the countries to decide on new “reciprocal tariffs”, after tariffs imposed by US President Donald Trump in February were struck down by the US Supreme Court. At that time, India and the US had reached an agreement for an additional 18% levy on most Indian exports. Although the framework is ready, the agreement can be finalized only when the Trump administration comes up with revised tariffs.“For India, this measure presents both opportunities and challenges. While India is subject to an additional 10% Section 301 tariff, it is in a relatively more favorable position compared to many competing Asian manufacturing hubs,” said Manoj Mishra, partner at consulting firm Grant Thornton India.
