India-US trade friction heats up

US businesses and diplomats are pressing India to cut tariffs, industry and government sources say, after New Delhi’s move to increase customs duties on dozens of products to help its flagship Make-in-India drive aggravated differences over trade.

Ford, which has two plants in India, has sought a reversal of the new tariffs on auto components, while Apple Inc is concerned its iPhones have become even more expensive in the price-conscious $10 billion smartphone market.

India and the United States have built close political ties and Prime Minister Narendra Modi was in Washington last summer, bear-hugging President Donald Trump in his personalised style of diplomacy. But trade friction is casting a shadow.

A US State Department spokesperson told Reuters that India must lower trade barriers, which were holding back economic ties.

Trump has already called out India for its duties on Harley-Davidson motorbikes, and this month Modi ordered them cut to 50 per cent from 75 per cent for high-end bikes.

But that has not satisfied Trump, who pointed to zero duties for Indian bikes sold in the United States, saying he would push for a “reciprocal tax” against countries, including US allies, that levy tariffs on American products.

“It is important that India make greater efforts to lower barriers to trade, including tariff and non-tariff barriers, which will lower prices to consumers, promote development of value chains in India,” said the State Department spokesperson, referring to Trump’s comments on motorbikes.

The US Congress has been pushing over the past year for greater pressure on India to dismantle economic barriers, and now House Republicans have raised the issue of the new round of duties with New Delhi.

“We conveyed our concerns to the Indian government last week to raising tariffs above WTO rates – especially as it relates to information technology,” a Republican aide told Reuters.