DNA Mone Edit: Trade war and its untold impact

Can the "tariff king" afford to annoy the US in the game of one-upmanship currently being played out between two largest democracies of the world?

In retaliation to the move by the US to impose punitive tax on imports like steel and aluminium, India had in June announced the imposition of additional tariff on 29 American exports to India, from apples to phosphoric acid but kept on deferring its implementation. This has now been extended to the beginning of November ostensibly as a bargaining tool in the current rounds of negotiations between the two countries.

Even as the negotiations carry on, India has once again announced import duty hike on 19 "non-essential items", which ranges from aviation turbine fuel to washing machines, refrigerators and tyres, partly to deal with a sliding rupee and reduce its widening current account deficit (CAD).

A much smaller player in the world trade, India should stay away from such moves. In today's world, every economy is dependent on other geographically dispersed countries -- be it for markets or inputs. Imposition of taxes on finished product imports can easily be countered by putting retaliatory duties on the components that go into that product, thereby defeating any purpose of encouraging local manufacturing.

Punitive tariffs have other ramifications too. For instance, the imposition of duty on scraps has led to a disproportionate diversion to those items to India as seen in case of aluminium.