Costs to American companies from the Administration’s decision to terminate India’s GSP eligibility continue to grow. In July alone, US importers paid an estimated $30.4 million in new tariffs (previously) duty-free imports from India.
Lost GSP is hurting companies like Warehouse Associates, which canceled plans to create new US manufacturing jobs in Indiana that depended on duty-free components from India. Warehouse Associates doubled from 20 to 40 employees between late 2017 and early 2019. It currently imports finished automotive parts and fluid transmission lines sold to American manufacturers like Cummins and Deere.
Instead of creating new jobs in Indiana, lost GSP for India has Warehouse Associates exploring an expansion in Mexico. Manufacturing in Mexico would allow Warehouse to avoid tariffs altogether: Indian components can be imported duty-free into Mexico, and finished goods from Mexico can be imported duty-free into the United States.
The map below shows the breakdown of the estimated $56 million in new tariffs paid, or about $1 million per day, between early June and the end of July. Companies in Texas – where President Trump will join Indian Prime Minister Narendra Modi on Sunday – paid more new taxes ($6.5 million) due to GSP lost than any other state.
Data show that US companies have suffered most from higher tariffs. Despite lost GSP, Indian exporters are selling more than ever to the United States. Imports from India of GSP-eligible products increased over 40% in June/July 2019 compared to a year earlier. It’s likely the result of companies shifting sourcing away from China, a trend that started well before termination.
There have been a number of reports that a trade deal between the United States and India could be announced at an upcoming Trump-Modi meeting, either in Houston or in New York early next week. On September 17, a bipartisan group of 44 House members sent a letter to U.S. Trade Representative Robert Lighthizer today expressing their “strong desire to see GSP eligibility for India reinstated.”
Led by Representatives Jim Himes (D-CT) and Ron Estes (R-KS), the letter suggests an “early harvest” approach that “would ensure that long-sought market access gains for U.S. industries are not held up by negotiations over remaining issues.”
Getting some GSP back as soon as possible is critical for companies like Warehouse Associates, given that expansion decisions are still up in the air. The longer GSP remains terminated, the more likely that companies make long-term plans that do not include new American workers.