Paper: GS-III, Subject: Economy, Subject Code: E15, Topic: Trade & External sector, Issue: India plans retaliatory tariffs over U.S. auto import duties
Context:
India has notified the WTO of its proposal to impose retaliatory tariffs worth $724 million on U.S. imports. This is in response to the U.S. raising tariffs by 25% ad valorem on Indian passenger vehicles, light trucks, and automobile parts on March 26. India argues these U.S. measures violate WTO rules.
Key Takeaways:
- Tariffs are taxes imposed by a country on imported goods and services. They are used to protect domestic industries from foreign competition, generate government revenue, and sometimes as a tool in foreign policy. Tariffs raise the cost of imported products, making them less competitive compared to locally produced goods.
- Retaliatory tariffs are counter-measures taken by a country in response to tariffs imposed by another nation. When one country believes another has unfairly raised import duties or violated international trade norms, it may impose equivalent tariffs on imports from that country to offset the impact and signal disapproval.
Background:
- In March 2025, the United States imposed a 25% ad valorem tariff on several automotive imports from India, including passenger vehicles, light trucks, and auto parts. India has argued that these U.S. actions are essentially safeguard measures—temporary trade protections used to shield domestic industries from import surges—but were not properly notified to the World Trade Organization (WTO) and violated the consultation obligations under Article 12.3 of the Agreement on Safeguards.
The World Trade Organization (WTO) is an intergovernmental body established in 1995 through the Marrakesh Agreement, replacing the General Agreement on Tariffs and Trade (GATT, 1947). Headquartered in Geneva, Switzerland, it serves as the principal international organization governing global trade rules.
Its primary objectives are to:
- Promote free, fair, and predictable trade.
- Administer trade agreements.
- Serve as a forum for trade negotiations.
- Handle dispute settlement through its Dispute Settlement Body (DSB).
- Monitor national trade policies.
Key principles of the WTO include non-discrimination (MFN and National Treatment), transparency, predictability, and promoting fair competition.
Agreements under WTO include:
- General Agreement on Tariffs and Trade (GATT)
- General Agreement on Trade in Services (GATS)
- Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
- Agreement on Safeguards (AoS) – allows members to impose temporary import restrictions to protect domestic industries from sudden surges, subject to rules like notification and consultations.
- Recently, India notified the WTO about its intention to impose retaliatory tariffs worth $724 million on U.S. imports. This action is in response to the U.S. unilaterally increasing tariffs by 25% ad valorem on passenger vehicles, light trucks, and automobile parts from India in March 2025.
- India argues these U.S. measures effectively act as safeguard measures but were not properly notified to the WTO and violated consultation requirements under Article 12.3 of the Agreement on Safeguards.
- Under Article 8 of the AoS, India reserves the right to suspend equivalent concessions if consultations fail. This development underscores India’s use of the WTO’s legal framework to protect its trade interests and maintain a rules-based multilateral trading system.
La Excellence IAS Academy, the best IAS coaching in Hyderabad, known for delivering quality content and conceptual clarity for UPSC 2025 preparation.
FOLLOW US ON:
â—‰ YouTube : https://www.youtube.com/@CivilsPrepTeam
â—‰ Facebook: https://www.facebook.com/LaExcellenceIAS
â—‰ Instagram: https://www.instagram.com/laexcellenceiasacademy/
GET IN TOUCH:
Contact us at info@laex.in, https://laex.in/contact-us/
or Call us @ +91 9052 29 2929, +91 9052 99 2929, +91 9154 24 2140
OUR BRANCHES:
Head Office: H No: 1-10-225A, Beside AEVA Fertility Center, Ashok Nagar Extension, VV Giri Nagar, Ashok Nagar, Hyderabad, 500020
Madhapur: Flat no: 301, survey no 58-60, Guttala begumpet Madhapur metro pillar: 1524, Rangareddy Hyderabad, Telangana 500081
Bangalore: Plot No: 99, 2nd floor, 80 Feet Road, Beside Poorvika Mobiles, Chandra Layout, Attiguppe, Near Vijaya Nagara, Bengaluru, 560040
