 |
|
The Federation of Indian Export Organisations (FIEO) has expressed serious concerns regarding the potential disruption to India's steel and aluminium exports to the United States following President Donald Trump's announcement of a plan to double import tariffs on these metals. This proposed increase, which would raise tariffs from 25% to 50%, has raised alarm bells within the Indian export community, particularly concerning the impact on value-added and finished steel products, auto-components, stainless steel pipes, and structural steel components. The imposition of these tariffs is being considered under Section 232 of the US Trade Expansion Act of 1962, a law that grants the president the authority to impose tariffs or other trade restrictions if imports are deemed a threat to national security. This rationale, while employed by the US government, is viewed with skepticism by many international trade experts who believe that such measures often serve protectionist agendas rather than genuine security concerns. The potential consequences of these tariff hikes are far-reaching, potentially impacting India's engineering exports, which have been steadily growing in recent years. SC Ralhan, president of FIEO, has voiced concerns that higher duties could significantly erode India's price competitiveness in the American market, making it more difficult for Indian exporters to compete with domestic US producers and other international suppliers who may not be subject to the same tariffs. The US market is a critical destination for Indian steel manufacturers, who have been gradually increasing their market share through a combination of high-quality production and competitive pricing strategies. These tariff hikes threaten to reverse this progress, potentially leading to a decline in Indian steel and aluminium exports to the US. In fiscal year 2025, India exported approximately $6.2 billion worth of steel and finished steel products to the US, including a wide range of engineered and fabricated steel components, and around $0.86 billion of aluminium and its products. These figures highlight the significant economic stake that India has in maintaining access to the US market for these products. The proposed tariff increases are not only a concern for Indian exporters but also raise broader questions about the future of global trade and the potential for escalating trade disputes between major economic powers. While the US government may justify these measures based on domestic policy considerations, they send a discouraging signal to global trade and manufacturing supply chains, potentially leading to increased uncertainty and instability in the international market. The timing of these proposed tariff increases is particularly unfortunate, as India and the US are currently engaged in negotiations for a Bilateral Trade Agreement (BTA). The imposition of higher tariffs could complicate these negotiations, making it more difficult to reach a mutually beneficial agreement. Pankaj Chadha, chairman of EEPC India, has expressed concern that such unilateral tariff increases while BTA negotiations are ongoing will only make the work of the negotiators much more difficult and complicated. Chadha added that since the UK has been granted exemption from Section 232, the same exemption should also be extended to India, with TRQ (Tariff Rate Quota) restrictions, to ensure fair treatment and prevent Indian exporters from being unfairly disadvantaged.
The call for exemption from Section 232 echoes the sentiment within the Indian export community, who believe that India deserves to be treated on par with other key trading partners of the US. The imposition of a 25% additional duty would place a significant burden on Indian exporters and importers, potentially leading to reduced trade volumes and economic losses. The FIEO has urged the Indian government to take up the issue at the bilateral level to ensure that Indian exporters are not unfairly disadvantaged by the proposed tariff hikes. The history of trade relations between India and the US in the steel and aluminium sectors is marked by previous instances of trade disputes and protectionist measures. On March 8, 2018, the US implemented safeguard measures on certain steel and aluminium articles, imposing tariffs of 25% and 10% ad valorem, respectively, on such products, effective from March 23, 2018. These measures had a significant impact on Indian exports to the US and led to retaliatory actions by India. On February 10, 2025, the US revised the safeguard measures on imports of steel and aluminium articles, effective from March 12. These revisions further complicated the trade landscape and added to the uncertainty faced by Indian exporters. In response to these actions, the Indian government has taken a proactive approach, challenging the US measures at the World Trade Organization (WTO). New Delhi has argued that the US failed to notify the WTO Committee about its decision to apply safeguard measures and, as an affected member with significant export interests, has requested consultations with Washington and proposed retaliation against the measure. This highlights India's commitment to defending its trade interests and ensuring that the US adheres to its international obligations under the WTO framework. The potential trade war that could erupt from these tariffs extends beyond just India and the United States, potentially impacting the broader global economy. The imposition of tariffs and retaliatory measures can disrupt supply chains, increase prices for consumers, and reduce overall economic growth. Therefore, it is crucial that both India and the US engage in constructive dialogue and seek mutually beneficial solutions that promote free and fair trade. This includes addressing legitimate concerns about national security while also ensuring that trade measures are not used as a disguised form of protectionism. The ongoing negotiations for a Bilateral Trade Agreement (BTA) provide an opportunity for both countries to address these issues and establish a framework for long-term trade cooperation.
The successful conclusion of a BTA would not only benefit India and the US but also send a positive signal to the rest of the world about the importance of open and rules-based trade. However, achieving such an agreement will require both sides to be willing to compromise and address each other's concerns in a fair and transparent manner. The proposed tariff hikes on steel and aluminium pose a significant challenge to this process, but they should not be seen as an insurmountable obstacle. Instead, they should serve as a catalyst for renewed efforts to find common ground and build a stronger trade relationship between India and the US. The stakes are high, and the consequences of failure could be significant. Therefore, it is imperative that both sides approach these negotiations with a spirit of cooperation and a willingness to find solutions that benefit both countries. The future of India-US trade relations depends on it. The current situation underscores the importance of diversification in export markets. While the US remains a crucial destination for Indian exports, it is essential for Indian exporters to explore and develop new markets to reduce their dependence on any single country. This would make them less vulnerable to trade shocks and policy changes in specific markets. The Indian government can play a role in supporting this diversification effort by providing incentives and assistance to exporters who are looking to expand their presence in new markets. This could include providing market intelligence, facilitating trade missions, and offering financial support for export promotion activities. In addition, the government can work to improve the overall competitiveness of Indian exports by addressing issues such as infrastructure bottlenecks, high transaction costs, and regulatory burdens. This would make Indian exporters more resilient and better able to compete in the global market. The steel and aluminium industries are particularly vulnerable to trade disputes and protectionist measures, given their strategic importance and the prevalence of government intervention in these sectors. Therefore, it is essential for both India and the US to work towards creating a level playing field in these industries and reducing the scope for trade distortions. This could involve agreeing on common standards for product quality and safety, eliminating subsidies that distort competition, and ensuring that trade remedies are applied fairly and transparently. Ultimately, the goal should be to create a more open and predictable trade environment that fosters innovation, investment, and economic growth in both countries.
Beyond governmental actions and trade agreements, the role of individual businesses cannot be overstated. Indian companies must focus on innovation and efficiency to maintain competitiveness regardless of external factors. Investing in research and development, adopting advanced technologies, and streamlining production processes are critical for long-term success. Moreover, building strong relationships with customers and suppliers in the US market is essential. This involves understanding their needs and preferences, providing excellent customer service, and fostering trust and collaboration. By building strong business relationships, Indian companies can create a competitive advantage that is less susceptible to the impact of tariffs and other trade barriers. In addition, Indian companies should explore opportunities to invest in the US market. This could involve establishing manufacturing facilities, distribution centers, or research and development centers. By investing in the US, Indian companies can gain a better understanding of the US market, build stronger relationships with customers and suppliers, and potentially benefit from access to US technology and expertise. However, it is important for Indian companies to carefully assess the risks and opportunities associated with investing in the US market and to develop a sound investment strategy. The long-term implications of the proposed tariff hikes on steel and aluminium extend beyond the immediate impact on Indian exports. They raise fundamental questions about the future of globalization and the role of international trade in promoting economic development. The rise of protectionism and trade disputes threatens to undermine the multilateral trading system and could lead to a fragmentation of the global economy. This would have negative consequences for all countries, particularly developing countries that rely on trade for economic growth. Therefore, it is essential for all countries to reaffirm their commitment to the multilateral trading system and to work towards strengthening the WTO and ensuring that it remains a relevant and effective institution. This requires a willingness to engage in constructive dialogue and to address legitimate concerns about trade imbalances and unfair trade practices. It also requires a commitment to transparency, non-discrimination, and respect for the rule of law. The challenges facing India and the US in the context of the proposed tariff hikes on steel and aluminium are a microcosm of the broader challenges facing the global trading system. However, by working together to address these challenges, India and the US can demonstrate their commitment to open and rules-based trade and help to build a more prosperous and sustainable global economy.
Source: FIEO worried over US tariff hikes on steel, aluminium