How Will Trump’s Proposed Tariffs Impact India?

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The Indian metal industry seems divided for now over the implications of U.S. President Donald Trump’s announcement of the intention to impose tariffs on steel and aluminum imports.

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News reports and statements by industry leaders, along with reports by research agencies, show no unanimity on how the decision by the U.S. government, if implemented, would affect trade in India aand other neighboring Asian countries.

A report by news agency Press Trust of India (PTI), quoting industry leaders, said India will not be impacted much.

President Trump said last week he had decided to impose a steep 25% import tariff on steel.

Quoting H Shivram Krishnan, Essar Steel commercial director, the PTI report said the U.S. decision was not compliant with World Trade Organization (WTO) regulations. Former Steel Authority of India Ltd (SAIL) chairman Sushil Kumar Roongta said that the move may impact some of India’s steel exports to the U.S.

On the other hand, Sanak Mishra, former managing director of SAIL’s Rourkela Steel Plant, told PTI the decision may not have a significant impact on India as of its total steel imports, U.S. imports only 2% from India.

Some experts in India believe if the U.S. President went ahead with his decision, it would spark off a retaliatory war between exporting nations and the US, disrupting the just-about-recovering global steel industry.

On the official front, the Indian government, without naming the U.S., has let it be known that it may not exactly be a wise move. In a nuanced statement, Indian trade envoy J S Deepak said the government shared the concerns that some members had expressed on recent developments that could lead to new tariff barriers and even a trade war.

The envoy added that application of tariffs must respect the ceiling of bound rates agreed to at the WTO.

Several countries, including the European Union, China and Japan, to name a few, have criticized President Trump’s announcement.

India has also cautioned about the threats posed by the U.S. to the WTO’s dispute settlement functions because of the continued delay in selection and appointment of members to fill vacancies in the Appellate Body, the highest limb for adjudicating global trade disputes.

The U.S. is India’s largest export destination with U.S. $42.21 billion worth of shipments sent in 2016-17. But India’s steel and aluminum exports to the U.S. remain low. While steel exports to the U.S. stood at only U.S. $330 million, export of finished steel products were U.S. $1.23 billion in 2016-17. Total exports of aluminum and aluminum products stood at $350 million.

But a report in the Business Standard said India may have to brace itself for more imports from China into India as a result of the U.S. action.

On the other hand, ratings agency Moody’s said in a report that Asia, which produced more than two-thirds of the world’s steel, would “be minimally affected” when compared to the rest of America’s trading partners. Asian exports of aluminum and steel to the U.S. typically amount to less than 1% of GDP or exports, Moody’s reported.

Moody’s said the direct impact on steel companies would be manageable for the steel sector and rated steelmakers in Asia, because steel is predominantly traded within the region.

The CEO of Japanese giant Nippon Steel, the world’s second-largest steel producer by volume, has already dubbed Trump’s decision “regrettable.”

The one area likely to be affected if Trump goes ahead is metallic scrap imports. The U.S.’s imposition of import tariff on primary metals, including steel and aluminum, was likely to hit India’s 10 million tons (MT) of metallic scrap import annually, according to this news report. The U.S. makes up 20% of this import.

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More use of scrap as raw material for metal producers in the Unites States will result into its lower availability for importers across the world. This means scrap price would move up outside the U.S., which would impact secondary metal producers into India, according to Sanjay Mehta of Material Recycling Association of India.

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