The US says India and Turkey are no longer developing countries, but increasing tariffs on the two US allies could have unintended consequences.
UNITED NATIONS – President Trump moved to strip Turkey and India of preferential trade status this week, cutting the allies off from a decades-old economic benefit aimed at helping developing economies avoid paying tariffs on a slice of their exports.
In a pair of letters to Congress, Trump blamed India for failing to ensure American products enjoyed access to Indian markets. Turkey, meanwhile, had simply “graduated” from its status as a developing nation.
But there may more driving the president’s decision.
The U.S. is angry over Turkey’s decision this week to buy Russian, instead of U.S. missiles. India, meanwhile, continues to buy Iranian oil in the face of a U.S. sanctions push.
“The Trump administration is much less enthusiastic about the idea that developing countries should get a break.”
Philip Levy is a senior fellow on the global economy at the Chicago Council on Global Affairs.
“And it is thinking, ‘you know, this shouldn’t just be a handout, this should be something reciprocal.’ ”
Yet forcing India and Turkey to pay more tariffs on their U.S. exports could have unintended consequences.
Turkey, already courted by Russia, may have all the proof it needs that dealing with the U.S. financially – or diplomatically in Syria – isn’t worth it, while India could finally push back on prior Trump tariffs it initially shrugged off.
“India had held off on things like retaliation for steel tariffs, hoping that this would go well. So you may see something that looks like an escalation. This may unleash some of the retaliation.”
Levy says that could hurt the U.S. more than ending preferential trade status helps, and he thinks picking a fight with India also undermines Trump’s larger foreign policy goals.
“It’s an interesting example of how the Trump administration’s overall strategy tends not to line up, in that if you look at what they had described as their big approach to the Asia-Pacific, it was renaming it the ‘Indo-Pacific’ – that they were sort of going to work on an alliance with India. And so while they may be justified in this [Generalized System of Preferences] move, it’s not something that’s going to bring warmer relations with India.”