India Plans Retaliatory Tariffs Against US Auto Duties
India has announced plans to impose retaliatory tariffs on selected US products following the United States’ decision to increase import duties on Indian automobiles and auto parts. The US raised tariffs by 25 per cent on passenger vehicles, light trucks, and certain auto components from India. This move, effective from May 3, 2025, has triggered a formal response from India at the World Trade Organisation (WTO). The dispute arises amid ongoing efforts to finalise an interim trade agreement between the two nations.
US Tariff Increase on Indian Auto Imports
Recently, the US adopted a safeguard measure raising tariffs by 25 per cent on Indian passenger vehicles and auto parts. The tariffs took effect in May and are indefinite. India contends that the US failed to notify the WTO of these measures, which violates global trade rules under the General Agreement on Tariffs and Trade (GATT) 1994 and the Agreement on Safeguards. The tariffs impact approximately $2.89 billion worth of Indian auto exports annually.
India’s Retaliatory Measures at WTO
India formally notified the WTO of its intention to impose equivalent retaliatory tariffs on selected US products. The proposed suspension of concessions aims to match the estimated $723.75 million in duties collected yearly by the US on Indian auto imports. India’s action follows the WTO dispute settlement provisions allowing suspension of trade concessions if consultations fail. This is India’s second such response recently, following US tariffs on Indian steel and aluminium.
Legal and Trade Implications
India maintains that the US safeguard tariffs breach WTO norms as they were not properly notified and lack adequate consultation. The retaliatory tariffs are a legal right under WTO rules to counterbalance unfair trade measures. However, these tit-for-tat tariff hikes risk complicating ongoing bilateral trade negotiations aimed at improving economic ties. Trade experts warn that escalating tariffs could hinder cooperation between the world’s two largest democracies.
Impact on Bilateral Trade
The US tariffs affect portion of India’s auto export sector, valued at nearly $2.9 billion annually. India’s reciprocal tariffs will target US products of equivalent value. The dispute marks the fragility of global trade relations amid rising protectionism. Both countries are major trading partners, and their tariff conflict may slow progress on broader trade agreements intended to boost investment and market access.
Future Outlook
India’s WTO notification sets a 30-day period before retaliatory tariffs come into effect. The move signals India’s firm stance against perceived violations of global trade rules. It also puts stress on the challenges of balancing national interests with multilateral trade commitments. The trade dispute will be closely watched for its impact on global trade norms and the US-India economic partnership.
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