The United States has doubled its import tariffs on steel and aluminium from 25% to 50% starting June 4, aiming to bolster American steelmakers and the domestic manufacturing sector. However, this aggressive tariff hike is poised to disrupt global trade dynamics and could indirectly impact India’s steel industry.
Key Details of the US Tariff Increase:
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The tariff increase excludes the United Kingdom due to an existing trade agreement.
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The decision followed an updated sector report by US Commerce Secretary Howard Lutnick.
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President Donald Trump justified the hike by stating it will "further secure the steel industry," making it difficult for foreign competitors to compete in the US market.
Impact on India:
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Direct export impact on India is limited since India sends only a small fraction of its steel exports to the US.
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Indian steel producers with US operations may benefit if they manufacture locally, cushioning them from tariff effects.
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Union Minister HD Kumaraswamy acknowledged the impact as "minor," but noted shipments already en route to the US may face the new tariffs, causing some disruption.
Risks from Trade Diversion:
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Experts like CA Jashan Arora warn of trade diversion risks, where countries such as China might redirect steel exports away from the US to other markets, including India.
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This influx of cheap steel imports could flood the Indian market, lowering domestic prices and squeezing profit margins for local steelmakers.
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India's existing 12% safeguard duty on certain steel imports, introduced in April 2025, is aimed at preventing such diversion but may not be sufficient.
India’s Protective Measures & Market Response:
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The safeguard duty has already helped reduce steel imports; April 2025 saw an 11.3% drop in steel imports year-on-year.
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Domestic steel prices have risen accordingly, with manufacturers increasing prices by roughly Rs 2,000 per tonne.
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Dr. VP Singh of Great Lakes Institute highlights that the safeguard duty is helping prevent a supply glut and supporting local industry profitability.
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There are talks of potentially raising the safeguard duty to 24%, though this raises concerns about the impact on Indian consumers due to higher steel prices.
Longer-Term Outlook:
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India consumes about 136 million tonnes of finished steel annually but produces only about 102 million tonnes, leaving demand partially unmet by domestic production.
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Trade diversion may have a silver lining, providing cheaper steel supplies that could benefit Indian consumers and industries without severely hurting local producers.
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US steel prices are expected to rise short-term but may stabilize after new bilateral trade deals are negotiated.
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Dr. Singh emphasizes that for India to become a major global steel hub, Indian producers must reduce reliance on import protections and focus on competitiveness.
In summary, while India faces only a minor direct impact from the US tariff hike, the broader repercussions through global supply chain shifts and trade diversion pose challenges and opportunities. India’s protective measures are proving effective but may increase domestic steel prices, affecting consumers. The situation calls for a balanced approach to support domestic producers while safeguarding consumer interests and striving for greater global competitiveness.
