Why in News?

In response to the U.S. imposing 25% tariffs on steel and aluminium imports in March, India has notified the WTO of its plan to impose tariffs on $7.6 billion worth of U.S. imports.

The move aims to recover an estimated $1.91 billion in losses suffered by Indian exporters.

What’s in Today’s Article?

• Reinstatement of U.S. Tariffs on Indian Steel and Aluminium
• Dispute Over Nature of Tariffs
• Concerns Over Competitiveness
• A Strategic and Calibrated Response

Reinstatement of U.S. Tariffs on Indian Steel and Aluminium

• In March 2025, U.S. President Donald Trump, in his second term, reimposed 25% tariffs on all imports of steel and aluminium, eliminating earlier exemptions.
• The move aimed to protect U.S. domestic industries from “unfair trade practices” and “global excess capacity.”
• Historical Context: Tariff Measures During Trump’s First Term (2018)
  • Trump first introduced 25% tariffs on steel and 10% on aluminium in March 2018.
  • These protectionist measures were part of his "America First" economic approach.
• Temporary Easing Under Joe Biden (2021–2023)
  • After Joe Biden assumed office in 2021, trade tensions eased.
  • During PM Modi’s U.S. visit in September 2023, the U.S. pledged to provide greater market access to Indian steel and aluminium as a gesture following India’s withdrawal of earlier retaliatory duties imposed in 2019.
• Return to Protectionism in 2024
  • With Trump’s return to the presidency in 2024, the earlier tariffs were reinstated, this time setting both steel and aluminium duties at 25%.
• India’s Retaliation in 2019 Post-GSP Removal
  • India had earlier retaliated in June 2019 when the U.S. revoked India’s Generalised System of Preferences (GSP) benefits.
    • GSP is a unilateral trade measure where developed countries offer preferential tariff treatment to developing countries, often by reducing or eliminating tariffs on specific products.
  • India responded by imposing tariffs on 28 U.S. imports, including apples, almonds, and walnuts.

Dispute Over Nature of Tariffs

• India counters the U.S. claim that the tariffs on steel and aluminium are based on national security concerns.
• The U.S. argues its actions fall under GATT 1994’s security exception and are not “safeguards.”
• India, along with the EU, China, and the U.K., disagrees and views the tariffs as safeguard measures, which have different legal obligations under WTO rules.
• Lack of Mandatory Consultations
  • India has pointed out that the mandatory pre-consultations required under the Agreement on Safeguards (AoS) were not conducted.
  • According to India, this procedural lapse violates WTO obligations.
• Right to Suspend Concessions
  • Citing the adverse impact on its trade, India has reserved its right to suspend trade concessions or obligations toward the U.S.
  • India has stated it will take measures that are “substantially equivalent” to the negative effects caused by the U.S. tariffs.

Concerns Over Competitiveness

• Indian exporters had expressed worry that U.S. tariffs would make their products costlier and uncompetitive.
• In 2018, India faced disadvantage compared to countries that had received exemptions from the U.S. tariff regime.
• The current regime offers no exemptions, leveling the field but still raising pricing concerns.
• Sharp Decline in Steel Exports
  • The impact of U.S. tariffs on India’s steel exports was substantial:
    • Exports to the U.S. dropped by 48.4% in FY 2019-20 and 46.7% in FY 2020-21.
    • U.S. share in India’s steel exports fell from 3.3% (2017-18) to 2.5% (2018-19).
  • Recent Recovery in Exports
    • Despite past declines, FY 2024-25 has seen a 44.21% rise in steel exports until February.
    • This follows a 42.3% decline in FY 2023-24, indicating recent resilience despite global challenges.
  • Industry Calls for Caution
    • Leading producers like SAIL have warned of global market volatility due to U.S. protectionist policies.
    • There are fears of retaliatory tariffs affecting the global trade balance.
  • Limited Gains for the U.S.
    • Ironically, the U.S. tariffs did not benefit its own economy significantly.
    • A 2019 analysis by the Federal Reserve found only a “small boost” in manufacturing jobs.
    • These gains were offset by higher input costs and the negative effects of retaliatory tariffs.

A Strategic and Calibrated Response

• India’s WTO action is seen as strategic rather than reactive.
• India’s approach is “rules-based and calibrated”, contrasting with the U.S.’ unilateralism.
• This positions India as a defender of multilateral trade norms, enhancing its reputation in global trade forums.
• Alignment with 'Make in India'
  • The move reflects India’s tougher stance on politically sensitive sectors like steel and aluminium.
  • This assertiveness aligns with the Make in India initiative, aimed at boosting domestic industry and reducing foreign dependency.