Indian exporters are in total confusion about Tariff after U.S. Supreme Court verdict

Trump’s arrogance hits the interests of American consumers also

By Anjan Roy

The US Supreme Court’s striking the Donald Trump’s tariffs has pulverised the president in more ways than one. Trump had sworn by tariffs as the ultimate tool in his hands; the judgement has shown Trump his place —he is not supreme. Politically, it could not have been more damaging than coming before the midterm elections.

The judgment has exposed Donald Trump as only a petulant, impulsive, unthinking, dogged person no matter what he would pursue his schemes of vengeance. With this judgment in place, Donald Trump’s forthcoming meeting with XI Jinping would be blatantly one-sided.

But on the ground, the United States is now grappling with the question whether the Federal government will refund the tariffs they collected under Donald trump’s executive orders imposing large reciprocal tariffs on imports from select countries.

The government representatives are confused and different people are saying different things. The Democrats have seen their opportunity and planning to bing legislation to force the government to return all tariffs collected. On some estimates, the US Federal government owes $1,700 to each US family on the tariffs collected. The Democrats are saying this was a tax on individuals.

The US Federal government agencies had earlier assured that in case the Supreme Court struck down the tariffs as legal, every penny of tariffs collected would be returned to whose who paid them. That could mean a two stage repayments of tariffs collected. But now the Federal government is saying something like the repayments should depend on the verdicts in lower courts.

It is not that this is unprecedented. Earlier also in 1998, the Supreme Court had ruled some tariffs illegal and repayment were made. However, the amounts involved in that case were minuscule compared with the present one — $738 million collected in tariffs in 1998 compared with $134 billion now in the wake of the Liberation Day tariffs.

Any repayments of the tariffs collected would have to be a two-stage process; first to the corporate entities who paid the tariffs initially; then at the next stage to the final customers who paid it in terms of higher prices. All these components would have to be broken up and re-compensated in proportion.

Experts believe that it could take years for the process to be completed and reams of data surfing to exactly quantify the amounts to be paid to different entities. However, in these days of meticulous data in the digital infrastructure for payments and transactions, it should not be that difficult to ascertain the payments chain.

The case however proves one point. The US president’s tariffs were paid not by the exporters and overseas entities, these were paid first by the US companies which had imported the items and then finally the US consumers who had purchased these goods. Trump’s vainglorious claims that his tariffs made foreign countries pay to US was all just that —vainglorious claims.

And going by the post-tariff trade data as the US department revealed, these tariffs and higher prices did not much dampen the US demand for imported products. This is so because the US no longer produces most of the smaller consumer products that had come under the tariffs orders of the president are no longer produced in US or there is an ecosystem to produce them either.

What impact the US Supreme Court order will have on Indian trade interests with United States. The first fall out is that the continuing trade talks between the two countries is put off. So the question of a quick trade agreement goes out of the window — so the claim that India had admitted to a zero duty regime on US imports no longer holds. These would have to be worked out almost afresh in the light of new dispensation that the US creates.

For now, union commerce and industry ministry had only stated that India was carefully studying the exact order of the US Supreme Court and would work out the implications for India thereafter. Taking any steps could come thereafter.

As such, the US president has invoked another provision in the trade laws to impose a flat 10% duty on all imports in the interests of balance of payments deficits. Will this mean that all imports into USA seal be subject to a flat 10% entry levy irrespective of their origin.

That should also mean that all other levies and understandings reached between USA and individual trading countries on their separate tariff agreements would stand invalid and the 10% levy should be charged. In a way, this would be disadvantageous to India.

Many countries now faced much higher tariff levels which helped Indian exports comparatively as India was faced with a 18% tariff liability. In case of China, it was burdened with a much higher level of overall tariff. Some of India’s nearest competitors also faced with higher tariffs.

At any rate, India’s merchandise exports were not large, despite whatever was being claimed, compared with other countries. Where India faces greatest threat was in maintaining its services exports. That area seems mainly to have been left untouched with the tariff wars. As long as that remains so, it is in India’s interests. (IPA Service)