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The specter of increased tariffs looms large over India's export sector as former US President Donald Trump's proposed 50% tariff on steel and aluminium imports threatens to disrupt trade relations and significantly impact the country's engineering exports. The Engineering Export Promotion Council of India (EEPC) has voiced serious concerns about the potential ramifications of this decision, highlighting that the new tariff, slated to take effect from June 4, 2025, would effectively double the existing duty on these key materials. Steel and aluminium products currently constitute a substantial 25% of India's engineering exports to the United States, representing a significant portion of the overall trade relationship between the two nations. The EEPC estimates that the annual export of steel, aluminium, and their derivatives to the US currently stands at approximately $5 billion, a figure that underscores the magnitude of the potential economic impact.
The imposition of a 50% tariff would undoubtedly make Indian steel and aluminium products significantly more expensive in the US market, potentially leading to a sharp decline in shipments. This would not only hurt Indian exporters but also disrupt established supply chains and potentially lead to job losses within the affected industries. The EEPC has pointed out that the earlier 25% tariff on steel imports, which Trump implemented previously, had already created considerable difficulties for Indian exporters, suggesting that a further increase would exacerbate these challenges and further erode India's competitiveness in the US market. Pankaj Chadha, chairman of EEPC India, emphasized the severity of the situation, stating that if the US proceeds with its plan, exports of these key items will become costlier, leading to a likely dip in shipments. This sentiment reflects the widespread anxiety within the Indian export community regarding the potential consequences of the tariff hike.
While India's direct steel exports to the US may be relatively modest, the Trump tariff has the potential to disrupt global trade patterns by intensifying international competition and affecting prices. This is because the tariff creates an artificial barrier to entry for Indian products, forcing them to compete with domestic producers in the US or with products from countries that have secured exemptions. The UK, for example, managed to secure exemptions from the 25% tariff through a bilateral trade agreement, giving them a competitive advantage over Indian exporters. In light of this, the EEPC has urged the Indian government to seek similar relief during the ongoing bilateral trade agreement (BTA) discussions with the US. The EEPC argues that the proposed tariff increase is particularly ill-timed, given the ongoing BTA negotiations, as it could potentially complicate the process and make it more difficult for negotiators to reach a mutually beneficial agreement. Chadha added that the proposed tariff increase by the Trump administration is likely to impact the engineering exports which are about USD 5 billion under this head.
The Aluminium Association of India (AAI) has also voiced strong concerns over the US decision, warning that doubling the aluminium import tariffs would inflict significant damage on Indian manufacturers who are already struggling against low-cost imports. The AAI pointed out that the aluminium industry has invested heavily in building domestic production capacity and deserves protection from unfair competition. The AAI statement emphasized the vulnerability of the Indian aluminium industry to external pressures, particularly from surging low-cost imports. The association argues that the 50% tariff announced by Trump will further exacerbate these challenges, potentially jeopardizing the viability of Indian aluminium manufacturers. Aluminium is also a strategically important metal for several critical sectors in India, including defence, aerospace, telecommunications, energy transition, power, and construction. Disruption in the supply of aluminium, or an increase in its price due to tariffs, could have far-reaching consequences for these industries.
The AAI has called for protective measures similar to the recent 12% provisional safeguard duty imposed on certain steel imports, arguing that the aluminium industry requires similar support to remain competitive. The association highlighted that the aluminium industry has invested over Rs. 1.5 lakh crore to build a domestic production capacity of 4.2 million tonnes per annum (MTPA), which demonstrates the industry's commitment to growth and self-sufficiency. The AAI believes that these investments deserve protection through appropriate trade policies. The Federation of Indian Mineral Industries (FIMI) also expressed concern over the potential impact of the tariff hike. B K Bhatia, Director General of FIMI, noted that the US accounted for $946 million of India’s aluminium exports, underscoring the importance of the US market to the Indian aluminium industry. Bhatia expressed hope that the issue will be resolved during the ongoing trade negotiations between India and the USA, suggesting that a negotiated solution is the preferred outcome.
In 2024-25, India’s exports to the US under this category comprised $587.5 million in iron and steel, $3.1 billion in articles of iron and steel, and $860 million in aluminium products, totaling $4.56 billion. This data provides a clear picture of the specific products and their respective values that are likely to be affected by the tariff hike. The latest tariff hike falls under Section 232 of the US Trade Expansion Act of 1962, which allows the US President to impose duties if imports are deemed a threat to national security. This provision has been used by previous administrations to justify trade restrictions on various goods, often sparking controversy and retaliatory measures from affected countries. The invocation of Section 232 in this case raises questions about the validity of the national security rationale, particularly given the strong trade relationship between India and the US.
President Trump had previously imposed a 25% tariff on steel and a 10% tariff on aluminium in 2018, later raising aluminium tariffs to 25% in February 2025. This history of tariff increases suggests a pattern of protectionist trade policies under the Trump administration, which has created uncertainty and instability in the global trading system. The potential impact of the 50% tariff on steel and aluminium imports from India is significant and far-reaching, potentially affecting a wide range of industries and disrupting established trade relationships. The Indian government and industry associations are actively engaging with their US counterparts to seek a resolution that mitigates the negative consequences of the tariff hike and preserves the mutually beneficial trade relationship between the two countries. The future of India's steel and aluminium exports to the US hinges on the outcome of these ongoing negotiations and the willingness of both sides to find common ground.