US Probes India Over $58B Trade Surplus With America

• US probes India over $58B trade surplus.
• Investigation targets excess manufacturing capacity.
• Tariffs or trade actions may follow the probe.

The US has initiated an official inquiry against India and some other big trading partners over worries about ongoing trade surpluses and unfair industrial practices. The investigation has been launched by the U.S. Trade Representative (USTR) under Section 301 of the Trade Act of 1974. This is a tool by which the U.S.

checks on foreign policies that may disadvantage American businesses. U.S. officials said that the probe is targeting what it calls structural excess capacity in the manufacturing sectors of several countries. The U.S. government is of the opinion that some countries have produced far more goods than even their local and global market demands, which is resulting in overproduction and large trade surpluses with the U.S.

India has been singled out for attention in the inquiry as it had a $58-billion trade surplus with the United States in 2022. U.S. officials are of the view that the imbalance may be a result of excess manufacturing capacity in some sectors. The review has brought industries like textiles, healthcare goods, construction materials, and automotive products into focus, as these sectors are major contributors to India’s export performance in the U.S. market.

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The USTR has also highlighted sectors where India’s production could be well beyond the consumption of the domestic market. For instance, the solar module manufacturing sector is said to be capable of producing three times the level of solar modules required in India alone. Industries like steel and petrochemicals have also been identified as potentially having an excess of supply.

This inquiry is happening at a time when trade relations between India and the United States are quite sensitive. Earlier this year, the two countries had come to a preliminary agreement to lower tariffs on a number of Indian exports, dropping U.S. duties from 50% down to about 18%. Nevertheless, the situation turned complex after the U.S.

Supreme Court invalidated several reciprocal tariffs that had been imposed earlier, leading Washington to review its trade strategy. India is one of the countries under investigation. The United States has also launched similar investigations against China, the European Union Japan South Korea Vietnam Taiwan, Singapore Malaysia Thailand, Mexico Bangladesh Indonesia Cambodia Switzerland, and Norway. Following consultations and public hearings, the USTR will decide whether to impose tariff or non-tariff measures on these countries.