Trump tariffs: The last time steel, aluminium became a US-India issue

In an aggressive push to protect domestic industries, US President Donald Trump introduced 25 per cent tariffs on steel and aluminum imports under Section 232 of the Trade Expansion Act of 1962. While these measures were framed as an effort to curb what was perceived as unfair trade practices, they inadvertently triggered trade disputes with multiple nations.

As per Oppotimes, the US’s major steel suppliers—Canada, China, Mexico, South Korea and Brazil—may soon find themselves grappling with additional costs on exports worth billions of dollars. Canada remained the largest supplier of steel to the US, with $12.98 billion in exports despite an 8.2 per cent year-over-year decline, while China’s steel exports to the US grew by 10.5 per cent to reach $12.48 billion. However, India may also feel the impact of these protectionist measures.

Reciprocal tariffs and the domino effect

Trump’s push for reciprocal tariffs—where the US would match the duties imposed by its trade partners—raised fears of a global trade war. While meant to create fair trade relations, this policy might lead to retaliatory actions from affected countries, increasing market uncertainty.

The steel tariffs would have widespread effects, impacting not just direct exporters but also industries that rely on steel imports, which in turn raised costs for American manufacturers and consumers.

Although India was not among the top five steel exporters to the US, it still faces a threat.

In 2018, the US imposed a 25 per cent duty on Indian steel exports and a 10% duty on aluminum products, citing national security reasons, according to a PTI report. This affected India’s steel and aluminum exports worth $1.21 billion, adding an extra duty burden of $241 million.

In response, India imposed tariffs on 28 US products, including agricultural goods like chickpeas, lentils, apples and walnuts, affecting American exporters. These countermeasures aimed to protect India’s trade interests while pressuring the US to rethink its protectionist policies.

These trade disputes between India and the US led to several cases being filed at the World Trade Organisation (WTO). India challenged US countervailing duties on its steel exports and also objected to protectionist policies in the renewable energy sector.

On the other hand, the US raised concerns about India’s rules on solar cells and additional duties imposed on American goods.

A major breakthrough came in June 2023 when Prime Minister Narendra Modi and then US President Joe Biden announced a resolution to six long-standing WTO disputes. Under the agreement, the US allowed Indian steel and aluminum products to enter its market under the Section 232 exclusion process.

In return, India removed retaliatory tariffs on eight American products, restoring normal trade relations. A joint monitoring mechanism was also set up to oversee duty-free steel and aluminum exports up to 3.36 lakh tonnes per year. This agreement was an important diplomatic and economic step forward, strengthening ties between the two nations.

Impact on India-US trade

Resolving these disputes brought several benefits and Indian steel and aluminum manufacturers now have better access to the US market. The existing decision to allow 70 per cent of steel and 80 per cent of aluminum applications from India under the Section 232 exclusion process created new export opportunities.

Trade between India and the US has grown as a result. With fewer restrictions, India’s steel and aluminum exports to the US rose by 35 per cent. This agreement also set a positive example for future trade talks, showing that both countries are willing to negotiate and find solutions.

To safeguard domestic interests, India’s commerce ministry has set up an internal monitoring system.

Challenges ahead

Despite these advancements, challenges remain and the latest Trump announcement might emerge as one of them.

The looming decision to impose steel and aluminum tariffs by the US, and the subsequent trade disputes, will only further complicate the complexities of global trade. For India, the resolution of WTO disputes and the restoration of market access in the US serve as a testament to the power of diplomacy and strategic negotiations. But the real question is how much the US under President Trump will agree to bend.

There is no doubt that With Trump securing a second term, the India-US trade relationship is once again under scrutiny. Trump has repeatedly reiterated his demand for “reciprocal taxes,” targeting what he claims are India’s high tariffs on American goods. This raises concerns about another wave of trade tensions, reminiscent of his first term when he stripped India of its preferential trade status under the Generalised System of Preferences.

During his campaign, Trump frequently cited India’s tariffs as an example of unfair trade practices. For India, the stakes are high. The US remains its largest trading partner, with bilateral trade exceeding $190 billion in 2024.

The coming months are likely to shape how the US-India trade progresses over the next few years.