U.S. President Donald Trump said on Monday he intends to end India's preferential trade treatment under a program that allows $5.6 billion worth of Indian exports to enter the United States duty free.
Trump, who has vowed to reduce U.S. trade deficits, has repeatedly called out India for its high tariffs.
"I am taking this step because, after intensive engagement between the United States and the Government of India, I have determined that India has not assured the United States that it will provide equitable and reasonable access to the markets of India," Trump said in a letter to congressional leaders.
The U.S. Trade Representative's Office said removing India from the Generalized System of Preferences (GSP) program would not take effect for at least 60 days after notifications to Congress and the Indian government, and it will be enacted by a presidential proclamation.
The U.S. goods and services trade deficit with India was $27.3 billion in 2017, according to the U.S. Trade Representative's Office.
India is the world's largest beneficiary of the GSP program and ending its participation would be the strongest punitive action against India since Trump took office in 2017.
U.S.-India trade ties were hurt after India unveiled new rules on e-commerce that restrict the way Amazon.com Inc and Walmart Inc-backed Flipkart do business.
The e-commerce rules followed a drive by New Delhi to force global card payments companies such as Mastercard Inc and Visa Inc to move their data to India and the imposition of higher tariffs on electronic products and smartphones.
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