Trade Wars Current Affairs

US slaps 25% tariff on $50 billion worth of Chinese goods

United States has slapped stiff 25% tariff on US $50 billion worth of Chinese goods. It has accused China of intellectual property (IP) theft and unfair trade practices. This decision has triggered full-fledged trade war between world’s two largest economies.

Key Facts

The tariffs will be applied in two waves. The first will apply to 818 Chinese goods worth $34 billion and in second wave it will apply to 284 goods worth another $16 billion. The focus of the tariffs is on industrial goods, particularly in areas identified under China’s Made in China 2025 plan designed to encourage growth in particular industries. It generally focuses on products from industrial sectors that contribute to or benefit from “Made in China 2025” industrial policy. It includes industries such as information and communications technology (ICT), aerospace, robotics, industrial machinery, new materials, and automobiles.

Background

US’s decision to impose fresh tariffs on China follows his recent imposition of steep tariffs on steel and aluminium imports from Canada, European Union and Mexico on national security grounds. The EU and Canada are planning to enact retaliatory tariffs starting in July 2018. Mexico has already retaliated with its own tariffs on US goods.

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US challenges India’s export subsidy programmes at WTO

The US Trade Representative (USTR) has challenged Indian export subsidy schemes at World Trade Organisation (WTO), saying these programmes harm its manufacturing sector and workers by creating an uneven playing field.

Key Facts

According to USTR, at least half a dozen Indian programmes provide financial benefits to Indian exporters, which allow them to sell their goods more cheaply to detriment of US workers and manufacturers. These programs are Merchandise Exports from India Scheme (MEIS), Export Oriented Units Scheme and sector specific schemes, including Electronics Hardware Technology Parks Scheme, Special Economic Zones (SEZs), Export Promotion Capital Goods Scheme (EPCGS) and Duty Free Imports for Exporters Programme.

It has alleged that through these programmes, India has given exemption from certain duties, taxes, and fees which benefits numerous  exporters, including producers of steel products, pharmaceuticals, chemicals, information technology products, textiles, and apparel.

It also has alleged that earlier India was under limited exception rule under WTO specified for developing countries. It allowed specified countries to continue to provide export subsidies temporarily until they reach defined economic benchmark. But now it has surpassed benchmark in 2015. India’s exemption has expired, but India has not withdrawn its export subsidies and in fact it has increased size and scope of these programs.

Background

The US administration under President Donald Trump has taken various protectionist measures in an attempt to bring down its trade deficit from around $800 billion annually. For this, it is holding its trading partners accountable by vigorously enforcing US rights under various trade agreements and by promoting fair and reciprocal trade through all available tools, including the WTO. Earlier in March 2018, the Trump administration had announced tariffs of 25% and 10% on all steel and aluminum imports citing national security issue.

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