India applies new tariffs on US goods : New Trade fight ?

India’s decision to apply new tariffs on US goods over the weekend worsens a trade battle against the United States that may not be worth fighting and could turn around.

Indian tariffs on 28 US products, including almonds, apples and some chemicals came into effect on Sunday. New Delhi said the strengthening of tariffs was in retaliation for the US tariffs on steel and aluminum imposed last year, but it still has a lot to lose.

“India’s decision to retaliate with higher tariffs … is a strategic miscalculation,” said Priyanka Kishore, head of the India program at Oxford Economics, in a note released Monday. “Such a tough position in trade negotiations between India and the United States could do more harm than good,” she added.

A much larger target

Like China, which is facing a large-scale trade war with the United States, India sells much more to America than it buys. It imported $ 33 billion worth of US goods last year, worth $ 54 billion. Service trade between the two countries – valued at $ 54.6 billion last year – is also a little skewed in favor of IT companies such as Tata Consultancy Services, Infosys (INFY) and Wipro (WIT).

This gives Washington a much bigger target if it chooses to fight back against India.

“If the US decided to introduce retaliatory tariffs on labor-intensive exports, such as gems, jewelery and textiles, [or] more crackdown on computer services that would cause a lot more damage to India’s economic prospects, ” said Kishore.