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Indian Express
4 days ago
- Business
- Indian Express
‘It's time for a full tariff overhaul and aligning them with broader economic goals': Ajay Srivastava at explained.Live
Tariffs are essentially taxes that countries impose on imports to protect their domestic industries. When a country wants to shield local producers from foreign competition, it puts a tax on imported goods. Under the World Trade Organization (WTO), every member country submits a tariff schedule. This schedule outlines the maximum tariff a country can impose on each product. These are called 'bound tariffs.' Once negotiated and finalised, countries agree not to exceed these limits. For example, if India commits in its WTO schedule that the tariff on glass is 40 per cent, that becomes the bound tariff. India can lower it in the future but it cannot raise it above 40 per cent. Until recently, most countries abided by their WTO commitments and operated within those agreed limits. The problem started when US President Donald Trump began openly violating these rules. The tariffs he imposed broke at least two major WTO principles, first by exceeding the bound tariffs on a wide range of goods and second, by imposing country-specific tariffs, applying different rates on different sources. The WTO requires countries to treat imports from all member nations equally, so this step is a clear violation undermining the very foundation of the WTO system. Today, every country talks about free trade agreements (FTAs) as if they are the driving force behind global trade. In reality, less than 20 per cent of global trade happens through the preferential route, through Free Trade Agreements or FTAs. The remaining 80 per cent happens under the WTO's Most-Favoured Nation (MFN) tariffs. For countries like India, we need to focus on the 80 per cent trade that doesn't depend on FTAs to grow our exports meaningfully. India has increasingly positioned FTAs as a key tool to boost exports. Initially, our strategy was 'Look East.' We began signing FTAs with our neighbouring countries under SAFTA (South Asian Free Trade Area), then moved on to ASEAN, Japan, South Korea and later Australia. At one point, we were close to signing a deal with China through the Regional Comprehensive Economic Partnership (RCEP) but we withdrew at the last minute. After covering most of the East, we shifted our focus westward. We signed FTAs with Mauritius, the UAE, Switzerland and Norway. We've now announced the completion of negotiations with the UK and it's expected that we'll sign agreements with the US and the EU in the near future. Once these are finalised, India will have FTAs with more than 75 countries, covering roughly 75 per cent of global trade. So while we started late, compared to Europe or the UK, we're catching up fast. On the surface, countries like the US have average tariffs of around four per cent while India's average is closer to 17 per cent. However, this is the result of a larger, negotiated settlement under the General Agreement on Tariffs and Trade and the WTO, which the US helped broker and now conveniently ignores. During these negotiations, developed countries like the US, EU and Japan, then global leaders in global production of industrial and high-tech goods, wanted two things: One, to lower global tariffs to make it easier to sell their high-end goods. Two, to expand the scope of the global trading system beyond just goods to include intellectual property rights and services, such as finance, telecom and IT and agricultural subsidies. Developing nations, like India and China, were seen as producing low-end goods and having weaker intellectual property frameworks. Thus, the developed nations drafted the Trade-Related Intellectual Property Rights, or TRIPS, to bring Intellectual Property (IP) enforcement under the WTO, given its strong dispute settlement mechanism. The result was a trade-off: Developing countries accepted stricter rules on IP and services. In exchange, they were allowed to maintain somewhat higher tariff levels for a longer period. As part of this agreement, every country submitted a 'schedule of commitments' to the WTO for each product. For example, for glass, India might have said its maximum tariff, or 'bound tariff,' would be 40 per cent. These schedules were negotiated and accepted by all WTO members. Once the scope is set, the actual negotiations begin. Each country studies its domestic industries and identifies products and industries it would like to protect, which it considers sensitive sectors. For India, these include certain agricultural products to protect farmers and some industrial items. After industry-wide consultation, the country prepares an 'offer list', based on which tariff lines are listed in an Excel sheet. (India has around 12,800 of them.) In that list, it indicates which tariffs we'll reduce and the timing and extent of these reductions. Items to be excluded completely will be recorded in the negative or exclusion list. After both countries exchange their offer lists, they may choose to send each other request lists, asking the other to reconsider. The process continues over multiple rounds, often taking months or even years. Only after these are resolved do they announce the completion of negotiations, after which the legal teams finalise the text and the leaders of the countries sign the agreement. The agreement itself, typically, becomes effective two to three months after the signing. That's when the actual trade benefits — like lower tariffs and improved market access — start kicking in. We need to take a comprehensive look at our entire tariff structure. Right now, in every Union Budget, we make incremental changes — raise tariffs here, reduce them there — but what we haven't done is a full review of all 12,800 tariff lines. When I did a simple analysis, I found that over 90 per cent of our total Customs revenue comes from less than five per cent of our tariff lines. Meanwhile, the bottom 60 per cent of tariff lines contribute less than three per cent of revenue. So we have to ask why we are maintaining tariffs on those lines at all. A thorough review could also help us fix other long-standing issues, like inverted duty structures, where the import duty on raw materials is higher than on finished goods. That discourages domestic manufacturing because it makes local production less competitive. It has been over 25 years since we last did a full tariff overhaul. Now is the time to revisit the structure holistically. Given the number of FTAs we've signed and the structural issues in our system, it's time to conduct a proper, data-driven review. It's not just about revenue, it's about making tariffs more logical, targeted and aligned with our broader economic goals. In the late 1980s, India was ahead of China in several areas. We were exporting more computer hardware. Our pharmaceutical exports, APIs and formulations, were stronger than China's. In textiles and garments, we were neck and neck. When liberalisation came, we focussed more on deregulation without simultaneously building real manufacturing capacity. China, on the other hand, used that same period to build, sector by sector, with vision and intent. They began with textiles and garments, moved into machinery and then into electronics. They scaled up across industries methodically. Importantly, they had strong backing from American companies. What did China do differently? They applied highly strategic, foresighted policies and executed them well. In contrast, we continue to talk about increasing the share of manufacturing in our GDP, while importing the most basic items — knives, nail cutters, nuts, bolts. It's not for a lack of advanced technology, we've just never drilled down deep into the product level to build competitiveness. We need long-term commitment. We need to stop putting bureaucrats in charge of this transformation and instead identify people who have hands-on experience and empower them, set clear goals and get moving. That's how we change the trade equation, by building from the ground up.
Yahoo
13-06-2025
- Business
- Yahoo
Trump Touts Higher Duty Rate for Chinese Imports Under New Trade Deal
Hours after his cabinet announced that the United States would resume its previously agreed upon trade truce with China, President Donald Trump stoked confusion by revealing a new tariff rate of 55 percent for the sourcing superpower. Commerce Secretary Howard Lutnick and Treasury Secretary Scott Bessent, along with U.S. Trade Representative Ambassador Jamieson Greer, traveled to London this week to sit down with Chinese trade officials following weeks of trade tensions and the crumbling of a provisional agreement solidified in Switzerland in mid-May. More from Sourcing Journal China-to-US Freight Rates 'No Longer Surging'-Is it All Downhill from Here? Trump Likely to Extend Tariff Pause as Negotiations Take Shape, Treasury Secretary Says China and US Return to Terms of May Trade Truce At the end of negotiations on Tuesday, Lutnick indicated that both sides had agreed to 'implement the Geneva consensus' upon approval from Trump and Chinese President Xi Jinping. That deal centered on the deferral of reciprocal duties—lowered on the U.S. side to 30 percent and China's side to 10 percent—for three months. But by Wednesday morning, Trump had Truthed new information about the deal, saying that China will now pay a 55-percent duty rate, while the U.S. will still be subject to 10-percent tariffs on any goods imported into China. An all-caps missive said the deal with China was done, though subject to final approval by Xi and himself. 'RELATIONSHIP IS EXCELLENT!' he wrote. The president did not elucidate the reasoning for the 55-percent rate, which appears on its face to be a a 25-percent increase from the May agreement. But a White House spokesperson, who spoke to The Guardian anonymously, said the rate includes Trump's 10-percent universal baseline tariffs, a previous 20-percent punitive duty for fentanyl trafficking and an existing 25-percent tariff on China-made goods. 'A reported 55 percent tariff on our largest supplier of American apparel and footwear, stacked on top of already high MFN and Section 301 rates is not a win for America,' Steve Lamar, president and CEO of the American Apparel and Footwear Association, said in a statement. 'We're closely watching for more details, but the reality is this: nearly all clothes and shoes sold in the U.S. are now subject to elevated tariff rates,' he added. 'These costs will hit American families hard especially as they get ready for back-to-school shopping and the holiday seasons. New trade deals that bring lower tariffs can't come soon enough.' At a budget meeting with the House Ways and Means Committee on Wednesday, Secretary Bessent seemed to hint that the China deal may be shakier than the president indicated in his post on Truth Social. 'China has a singular opportunity to stabilize its economy by shifting away from excess production towards greater consumption. But the country needs to be a reliable partner in trade negotiations,' he told the Committee. 'If China will course-correct by upholding its end of the initial trade agreement we outlined in Geneva last month, then a big, beautiful rebalancing of the world's two largest economies is possible.' Footwear Distributors and Retailers of America senior vice president Andy Polk told Sourcing Journal that he believes this week's trade talks represent 'more political marketing than anything else.' 'It is positive that high level talks continue in hopes of getting us closer to a tariff end-game,' he said. 'However, there doesn't seem to be anything rally new coming out of these talks, just a climb down from threats.' Calling the president's tariff calculations 'very confusing,' Polk said he believes the 55-percent rate includes the Section 301 duties from his first term, the 20-percent fentanyl-related tariffs and the 10-percent baseline duties for all trade partners, among others. 'It is not a new tariff rate he is adding, it just seems to be fuzzy tariff math on his part.''Perhaps these steps forward will continue to unlock other issues to reduce this trade impasse, but I am not sure they are tackling the big items in a speed we need,' Polk said. 'We need a real deal that reduces tariffs back to reasonable levels quickly, and one that stabilizes them so shoe companies aren't jolted around constantly.' Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Time of India
11-06-2025
- Business
- Time of India
'Cutting red tape in India key to Swiss investments': Helene Budliger Artieda
Bern: A good regulatory framework and cut in red tape in India is important to attract Swiss investments, Switzerland's state secretary for economic affairs Helene Budliger Artieda has said. She also ruled out any impact of the withdrawal of most favoured nation treatment for India by Switzerland under the bilateral tax treaty on investment flows under the trade agreement with European Free Trade Association (EFTA). "We need to have the best framework conditions (for the $100 billion commitment on investment) and this was part of the business roundtable meeting in the presence of minister Goyal. It will be important that red tape be cut as much as possible," she said. Even in Switzerland, companies complain about too much red tape, she added. "It will be very important that India creates a good framework for Swiss investments to come in," she told reporters after her meeting with commerce and industry minister Piyush Goyal on Tuesday. Live Events India and the EFTA, which includes Switzerland, Norway, Iceland and Liechtenstein, signed a free trade agreement on March 10, 2024, which is expected to come into force in a few months. It provides for an investment commitment of $100 billion in 15 years from the grouping in lieu of customs duty concessions. Goyal is on a four-day visit to Switzerland and Sweden. On the issue of the Swiss government suspending the MFN clause in the Double Taxation Avoidance Agreement (DTAA) between India and Switzerland, Artieda said there has been some misunderstanding on this. "I think it's important to know that both India and Switzerland share a double taxation treaty and that treaty is valid and that means there will not be any issue," she said. In a statement in December 2024, the Swiss government announced the suspension of the MFN clause in the DTAA between India and Switzerland, potentially impacting Swiss investments in India and leading to higher taxes on Indian companies operating in the European nation. She noted that the trade agreement will help increase exports of Swiss watches and chocolates to India as companies will have the advantage of preferred access. New Delhi is also in talks with the European Union for a comprehensive free trade agreement. (The correspondent is in Switzerland at the invitation of the ministry of commerce and industry.)
CNBC
11-06-2025
- Business
- CNBC
Trump's 'done deal' with China? Trade damage already done and will remain, logistics firms, retailers say
President Trump declared the trade war with China a "done deal" on Wednesday, while his Commerce Secretary Howard Lutnick said tariffs on Chinese goods will be locked in at the current 55% rate without additional increases. Even if the resolution to the battle with the biggest U.S. foe in Trump's trade war is real, the damage to the supply chain, and U.S. consumer and economy, will remain, say logistics and retail industry executives. The latest headlines in the trade war come amid a slowdown in orders as the early 2025 period of tariff frontloading ended and firms across the economy prepared for a potential slowdown in the U.S., a fear the CEO of the nation's largest bank, JPMorgan, warned about again on in comments at an industry conference, with Jamie Dimon saying "I think there's a chance real numbers will deteriorate soon," at a Morgan Stanley event on Tuesday, before the Trump's administration's most recent comments. Alan Baer, CEO of logistics firm OL USA, said the existing 55% tariff on Chinese goods will put hundreds, if not thousands, of companies and ultimately jobs at risk. "Very few firms have the pricing power to absorb the tariffs or raise prices to offset the impact," Baer said. "Ultimately, the consumer pays," he added. White House officials explained to CNBC the 55% tariff mentioned in President Trump's social media post is the stacking of the Chinese tariffs. This is the minimum rate being paid by US shippers. US importers tell CNBC the rate is still way too high to resume full orders. "A 55% tariff from China will substantially cause instability for consumer goods companies that are bringing goods in from China," said Bruce Kaminstein, a member of NY Angels and founder and former CEO of cleaning products company Casabella. "President Trump recently said he doesn't want to make t-shirts? Why is he doing this then? Does he want to make spatulas? I don't think so," he added. The latest national inflation data released on Wednesday showed a smaller than expected increase in prices, though it is expected to remain volatile with tariffs policy uncertainty remaining. Kaminstein said with most companies working on a 40-60% percent gross margin, this will cause either substantial price increases or substantial cutting of expenses to survive, adding stress to the cash flow of these companies. "A reported 55% tariff on our largest supplier of American apparel and footwear, stacked on top of already high MFN and Section 301 rates is not a win for America," said Steve Lamar, CEO of the American Apparel and Footwear Association. "We're closely watching for more details, but the reality is this: nearly all clothes and shoes sold in the U.S. are now subject to elevated tariff rates. These costs will hit American families hard, especially as they get ready for back-to-school shopping and the holiday season. New trade deals that bring lower tariffs can't come soon enough." The Chinese government has not confirmed the Trump statements beyond saying on Tuesday it had agreed to the "Geneva consensus" trade terms worked out earlier this year with the U.S. Trump said in a social media post on Wednesday about the deal that it is "subject to final approval" between himself and Chinese President Xi Jinping. The tariff uncertainty is also weighing on EU exports bound for the U.S. On Wednesday, Lutnick said an EU trade deal would likely come last, partially due to the need to deal with a bloc of countries rather than a single government. The current situation leaves freight carriers focused on U.S.-EU trade concerned. Andrew Abbott, CEO of Atlantic Container Lines, a niche ocean carrier on the Europe/US trade lane, told CNBC the pace of exports and imports has been good, but he is worried a major correction is coming because of the tariff uncertainty and lingering fears of a recession. "The transatlantic trade has seen an increase in cargo volume in both directions during the last month, averaging 15% compared to last year" said Abbott. "An increasing number of our U.S. import customers are expressing fears of reduced sales because of a potential U.S. recession in the second half, so this is weighing heavy on people's minds," he added. As a result, Abbott said many companies are choosing the "wait and see" strategy ahead of any deal being made. The trade headlines and concerns come ahead of an expected increase in orders in July and August, peak season for when containers are scheduled to arrive for the holiday shopping season. But logistics experts say there will be no Covid-level surges at U.S. ports. "Companies pulled in freight to get out of the tariff crosshairs in March, April, and May," said Dean Croke, DAT Freight & Analytics principal analyst. "Warehouse distribution surged at that time. We are essentially in peak season now," he added. The first customers to take advantage of the tariff pause window were those with time-sensitive cargo, like medical supplies and high-value cargo, like automotive parts, luxury furniture, and fashion, according to Mike Short, president of global forwarding for CH Robinson. Noah Hoffman, vice president for retail logistics for C.H. Robinson, told CNBC that when he was visiting one of its biggest retail customers last week, "I was only sort of surprised to see jack-o'-lantern dinner plates in their distribution center already." "We're four months out and already moving Halloween items to be ready for store delivery the next day. We're seeing the same thing in our retail consolidation centers, where we're pulling in seasonal and holiday freight from multiple retail suppliers. This is a combination of carryover inventory from last year and freight front-loaded in Q1 to avoid the higher tariffs that were coming in April," Hoffman said. After the U.S. agreed to a pause in the trade war with China, plans were made for shipping that will result in "a busy four-week period this summer," Croke said. But he added, "trucking carriers are worried about the rest of the year. The second quarter is normally an important setup quarter for the rest of the year, which drives rates up. This means as of now, they are worried they will play catch-up for the rest of the year." In the current tariff pause window, there is still time to bring merchandise in from China before the 90-day window closes in mid-August, Hoffman said. "Domestically, we might be moving some of that freight in late June and into July. So, shoppers may have fewer back-to-school items to choose from, but at this point, glow-in-the-dark skeletons and fake vampire teeth will probably make it," he added. The trucking industry, in particular, is facing a variety of challenges. While imports contribute approximately 10% of trucking demand, domestic manufacturing is traditionally the main driver, but demand is down. Produce season, another industry driver, is adding to headwinds due to colder spring temperatures in California and decreased consumer demand. "I think the damage is done this year," Croke said. "Carriers will struggle to recover this year. The supply chain will not recover until these trade deals are done. When you lose trust, how do you make business decisions when it can be undone in a tweet? You have to expect the worst-case scenario, and anything better than that is an upside. I don't see how the market recovers," he added. The trickle-down impact of the lower freight volumes can be seen in intermodal volume, down 7.42% year over year, and truckload volume, down 13.37% year over year. Both the rail and trucking industries make their profits in moving containers. The Ocean TEU Index, which represents the volume of ocean container bookings, shows 2025 is trailing 2024 slightly year-over-year. Historically, cargo volume has been an early U.S. consumer demand prediction tool. The National Retail Federation's forecast, based on orders and container analysis for June through October's holiday shipping season, is down 14% year over year. Jon Gold, vice president of supply chain and customs policy at the National Retail Federation, said once a deal is signed, the tariff rate on China will be critical for business decisions. "We look forward to getting more information from the administration. However, agreeing to a 55% tariff that maintains the current IEEPA, fentanyl, and Section 301 tariffs is still extremely high, particularly for small businesses that continue to struggle with the current tariffs," said Gold. Manufacturing out of Asia fell to a 17-month low, according to the latest GEP Global Supply Chain Volatility Index, a leading indicator tracking demand conditions, shortages, transportation costs, inventories, and backlogs, based on a monthly survey of 27,000 businesses. Another leading indicator warning of a decrease in manufacturing orders and leaner holiday inventories is empty ocean freight containers. In ITS Logistics' June U.S. Port/Rail Ramp Freight Index, empty container return issues persisted at the nation's busiest ports of Los Angeles and Long Beach, "Empty container buildup continues despite higher outbound empties; congestion challenges remain," the report stated. CH Robinson expected softer conditions to persist at the Port of LA and Long Beach, with volume to rise month-over-month in early June, but remain lower than this time last year. According to North American port data analysis from ITS Logistics, the terminals which process the containers at ports nationally are running at 60-75% capacity. The U.S. export market will also continue to experience challenging conditions due to limited vessels after a pullback in sailings by ocean freight companies. At the Port of New York, a surplus of empty containers is a result of New York port terminals restricting returns and limiting some export bookings to free up vessel space and improve flow. "Ongoing blank sailings have hindered carriers' ability to reposition equipment efficiently. With limited vessel calls and mounting backlogs, this imbalance is expected to persist in the weeks ahead," C.H. Robinson reported. At Gulf Coast ports, tariff-related demand shifts and blank sailings significantly reduced the volume of incoming containers. "As a result, exporters should expect tightening container availability, particularly at inland rail ramps and U.S. Gulf Coast ports such as Houston, starting in July or August," C.H. Robinson reported. During Covid, the transport of empty containers back to China took precedence over U.S. exports. Manufacturers in China and Asia needed those containers so they could fill them with products quickly to keep up with the tremendous U.S. consumer demand. "With the significant reduction in vessels calling LA/LB due to the tariff activity, we are seeing significant increases in empty container dwell outside of the terminals," said Paul Brashier, vice president of global supply chain at ITS Logistics. "It is getting very difficult to find locations to terminate empties and in addition many ocean carriers are implementing laborious termination policies not seem since the post- Covid era." The UK tariff pause resulted in the restoration of more "normal" volume in that market, Abbott said, and the fear of an EU tariff pause ending in July fueled the increased EU shipments as manufacturers stocked shelves a bit more in case a UK-type deal for the EU, and deal on steel and aluminum tariffs, are not agreed to in a way that favors greater trade. But the ongoing uncertainty can be seen in the exports of the top countries to the U.S. Departed container volumes (twenty-foot equivalent units) show Italy is down 15% year over year. China is down 11% year over year, while South Korea is down 9%. Vietnam and India, both beneficiaries of the China-plus-one supply chain strategy, are up 21% and 13%, respectively. Factoring in the travel time and the trade pause deadlines, U.S. importers only have one more week to place ocean freight orders from the EU to have their products arrive in the U.S. before the tariff pause deadline. Orders from China need to be placed by the end of June to beat out the existing tariff pause deadline.
Time of India
11-06-2025
- Business
- Time of India
India needs better regulatory framework to attract investments: Swiss diplomat
Switzerland's State Secretary for Economic Affairs Helene Budliger Artieda has said a good regulatory framework and cut in red tape in India is important to attract Swiss investments. She said businesses here have raised concerns about bureaucratic hurdles. India and the four European nation bloc EFTA has signed a free trade agreement on March 10, 2024, which is expected to come into force from October 1. Under the pact, India has received an investment commitment of USD 100 billion in 15 years from the grouping while allowing several products such as Swiss watches, chocolates, and cut and polished diamonds at lower or zero duties. Also Read: India is a preferred place for Swiss businesses: State Secretary for Economic Affairs Live Events The European Free Trade Association (EFTA) members are Iceland, Liechtenstein, Norway, and Switzerland. She said for USD 100 billion investments, "we need to have the best framework conditions and this was part of the business roundtable meeting in the presence of Minister Goyal". "That will be important that red tape will be cut as much as possible. Even in Switzerland, companies always complain that there is too much red tape. It will be very important that India creates a good framework for Swiss investments to come in," she told reporters here after meeting Goyal on June 10. The Indian minister was here on a two-day official visit to meet businesses to attract investments into India. On the issue of Swiss government suspending the most favoured nation (MFN) status clause in the Double Taxation Avoidance Agreement (DTAA) between India and Switzerland, Artieda said there has been some misunderstanding on this. "But it really has no connection whatsoever... I think it's important to know that both India and Switzerland share a double taxation treaty and that treaty is valid and that means there will not be any issue," she said. In a statement in December 2024, the Swiss government announced the suspension of the MFN clause in the DTAA between India and Switzerland, potentially impacting Swiss investments in India and leading to higher taxes on Indian companies operating in the European nation. She also said implementation of the trade agreement will help increase exports of Swiss watches and chocolates in India. Also Read: Govt may help MSMEs register products abroad: Piyush Goyal Swiss companies will have the advantage of preferred access to markets in India for both watches and chocolates due to this pact. Further she added that Switzerland is confident of achieving the USD 100 billion investment commitment in 15 years in India. "I am very confident we will achieve that," she said. India-EFTA two-way trade was USD 18.65 billion in 2022-23 (of this, USD 17.14 billion with Switzerland) compared to USD 27.23 billion in 2021-22. The trade deficit was USD 14.8 billion in the last fiscal year. In 2024-25, India's imports from EFTA bloc increased to USD 22.5 billion from USD 22 billion in 2023-24. Exports stood at USD 1.96 billion in the last fiscal year, up from USD 1.94 billion in 2023-24. Switzerland is the largest trading partner of India in the bloc, followed by Norway. EFTA countries are not part of the European Union (EU). It is an inter-governmental organisation for the promotion and intensification of free trade. It was founded as an alternative for states that did not wish to join the European community. India is negotiating a comprehensive free trade agreement separately with the EU -- the 27-nation bloc. India has received about USD 10.83 billion in foreign direct investments (FDI) from Switzerland between April 2000 and March 2025. It is the 12th largest investor in India. The FDI inflow was USD 931.88 million from Norway, USD 29.41 million from Iceland and USD 105.93 million from Liechtenstein during the period.
