190531 Trump
US President Donald Trump waves at the crowd at the U.S. Air Force Academy graduation Thursday, May 30, 2019 at Air Force Academy, Colo. Image Credit: AP


President Donald Trump terminated India’s designation as a developing nation under a trade program, eliminating an exception that allowed the country to export nearly 2,000 products to the US duty-free.

“I have determined that India has not assured the United States that India will provide equitable and reasonable access to its markets,” Trump said in a proclamation on Friday evening. “Accordingly, it is appropriate to terminate India’s designation as a beneficiary developing country effective June 5, 2019.”

The action, which the administration has threatened for months, ends India’s preferential treatment under the Generalised System of Preferences, a decades-old programme designed to promote economic development.

The Trump administration has said concerns over market access for American goods being exported to India led them to withdraw the benefits, which prohibited duties on about $5.7 billion in imports in 2017, according to the Congressional Research Service.

Earlier this month, Trump announced that he was ending Turkey’s preferential trade treatment. Turkey was the fifth-largest beneficiary of the program — which allowed some Turkish exporters to sell products in the US duty free — in 2017 with $1.7 billion in covered imports to the US and India was the largest with $5.7 billion, according to a Research Service report issued in January.

The White House announcement on Friday came a day after Indian Prime Minister Narendra Modi was sworn into office for a second term after a landslide victory in last week’s national elections.

While the warning came months ago that the White House could cut India’s preferential treatment, the Trump administration decided to hold off on the announcement until after India’s elections to avoid hurting Modi politically, according to people familiar with the matter who asked to not be identified in order to discuss internal deliberations.

US Trade Representative Robert Lighthizer, who has grown increasingly irked over India’s trade barriers and practices, has a long-standing frustration with the country’s self-designation as a developing nation at the World Trade Organisation, the people said.

The March notice gave India two months to address the administration’s concerns before Trump made the end to the tariff treatment official.

The proclamation issued by the White House on Friday also subjects solar cells and washing machines from India and Turkey to duties imposed by Trump in 2018. Both nations had been exempted because of their status as developing countries.

Dan Anthony, executive director of the Coalition for GSP, a trade group, said that the decision “will cost American businesses over $300 million in additional tariffs every year.”

“There are no winners from today’s decision,” Anthony said in a statement. “American importers will pay more, while some American exporters will continue to face current market access barriers in India and others, including farmers, are very likely to be subject to new retaliatory tariffs.”