Context:
U.S. President Donald Trump has announced that the United States will impose reciprocal tariffs on India and other countries.
Reciprocal Tariffs:
- Tariffs imposed by one country on imports from another, matching the tariffs the latter imposes on its exports.
- For example, if Country A imposes high tariffs on Country B’s exports, Country B may respond with equal tariffs on Country A’s imports.
- Goal – To ensure fair trade by equalizing trade barriers.
- Purpose –
- Balancing Trade Relationships – To eliminate tariff rate disparities.
- Retaliation – As a countermeasure against high tariffs on exports.
- Negotiation Tool – To encourage tariff reduction during trade talks.
- Protecting Domestic Industries – By making imports less competitive locally.
- Issues –
- International Relations – Can strain diplomatic ties and lead to trade wars.
- Consumers – May result in higher prices for imported goods, reducing choices and increasing costs.
- Trade Relationships – Can prompt tariff discussions but might escalate to trade wars.
- Economic Implications – Short-term local industry support but higher consumer prices and global supply chain disruptions.
Source: TH
Previous Year Question
With reference to India’s decision to levy an equalization tax of 6% on online advertisement services offered by non-resident entities, which of the following statements is/are correct?
1. It is introduced as a part of the Income Tax Act.
2. Non-resident entities that offer advertisement services in India can claim a tax credit in their home country under the “Double Taxation Avoidance Agreements”.
Select the correct answer using the code given below:
[UPSC Civil Services Exam – 2018 Prelims]
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: (d)