Image Credit: twitter.com/POTUS , insights.nordea.com
In a move similar to the Trump administration’s trade wars with multiple countries, US President Joe Biden has threatened to impose tariffs on some Indian exports to the United States like prawns, basmati rice, furniture, etc. The tariffs are a retaliation after India imposed a Digital Services Tax(DST) on US tech companies operating in India. The Americans are planning similar tariffs against other countries like the United Kingdom, Turkey, Austria, Italy and Spain as well.
According to the Office of US Trade Representative- Katherine Tai, “India’s DST is unreasonable or discriminatory and burdens or restricts US commerce.” Tai, on June 2, announced a plan to increase tariffs by 25% on 26 items that the US imports from India. The list of items included prawns, basmati rice, furniture, jewellery, bamboo, copper foil, pearl, window shutters among others.
The US trade representative also informed that the increase in tariffs on Indian products is equal to the Digital Services Tax(DST) which US companies will have to pay in India. The Biden administration has calculated the value of DST that US companies would have to pay in India to be $55 million each year.
However, Katherine Tai has also clarified that the new tariffs won’t come into effect until December this year because of the ongoing negotiations between countries on a global minimum tax. “Today’s actions provide time for those negotiations to continue to make progress while maintaining the option of imposing tariffs,” she said.
As a part of the negotiations, the finance ministers of G7 countries agreed on Saturday to have a minimum corporate tax rate of 15 %. Discussions on the deal will next happen at the G20 summit next month.
It may be recalled that India had decided in April 2020 to tax 2% of the income that the foreign tech and e-commerce companies earn in India. The then Trump administration had also opposed the tax imposition.