In 2018, the Donald Trump government imposed steel and aluminium tariffs on steel and aluminium imports to USA on all its trading partners. The Trump government set a 25% tariff on steel and 10% tariff citing national security reasons, a strong blow for the steel exporters of India.
The tariff was increased as per Section 232 of the Trade Expansion Act of 1962 which authorises the US commerce secretary to conduct comprehensive investigations to determine the effects of imports of any article on its national security.
Even though ex-POTUS said that the tariff was imposed for national security reasons, he later indicated that trade in these products was unfair as foreign production was being subsidised and exports were being dumped into the US market was the reason for the tariff. On March 23, 2018, India became one of the first round of countries hit by Trump’s national security tariffs.
Trump imposed tariffs of 25% on $761 Million of steel and of 10% on $382 Million of aluminum imported from India. Together, these tariffs covered roughly around 2.3% of India’s exports to US in 2017.
India’s exports of steel products dropped by 46% in 12 months after the tariffs were imposed. In retaliation, India imposed tariffs on US exports to India on goods including apples, almonds, chickpeas, lentils and walnuts in 2019.
US agrees to lower steel and aluminum tariffs
In June US Trade Representative Katherine Tai announced that US and India have agreed to terminate six outstanding disputes at the World Trade Organisation. “India also agreed to remove retaliatory tariffs which it had imposed in response to the Section 232 national security measures on steel and aluminium,” mentioned Tai.
This means that US will reduce the current steel and aluminium tariffs bringing relief to Indian exporters. Lowering tariffs would mean cost savings on overall export costs. This will make it easier for Indian exporters to compete in the US market and to reduce final costs for American consumers leading to improved sales.
United States is one of the top markets for India’s steel exports. The country ranked eighth as a destination for India’s steel exports, accounting for 3% of exports (301000 MT) in 2018. The reduction in tariffs is a welcome news to India’s steel and aluminium exporters owing to increased profit margins from exports.