Donald Trump's decision to reinstate and expand tariffs on steel and aluminium imports has sent ripples through the global economy but will have minimal effect on India.

Key Takeaways:

• Donald Trump has reinstated 25% tariffs on steel imports and increased tariffs on aluminium under the umbrella of “America First”.
• Direct impact on India's steel and aluminium exports to the US is expected to be minimal due to relatively low export volumes.
• The tariffs will increase competition and exacerbate oversupply in other steel producing markets.
• The tariffs are seen as a tool for trade negotiations, potentially used to pressure trading partners into concessions.

On Wednesday, the 25% tariffs on steel and the increased tariffs on aluminium, previously at 10%, took effect, marking a return to the protectionist policies that defined his earlier presidency. While the immediate impact on India's direct exports to the US appears limited, the broader consequences for global steel markets and potential trade disputes present significant challenges.

Trump's rationale, as reiterated during a Business Roundtable meeting with CEOs, centers on revitalizing American manufacturing. He argues that the tariffs will incentivize companies to invest in domestic production, creating jobs and bolstering the US economy. "The higher it goes, the more likely it is they're going to build," Trump asserted, emphasizing that the tariffs are a tool to drive manufacturing back to the US.

For India, the immediate impact on direct exports to the US is projected to be minimal. India's steel and aluminium exports to the US are relatively low compared to major suppliers like Canada, Brazil, and Mexico. In the previous financial year, India's iron and steel exports to the US reached approximately $475 million, while iron and steel products amounted to $2.8 billion. The export value of aluminium and related products stood at around $950 million in 2023-24. These figures are dwarfed by the billions of dollars’ worth of steel and aluminium imported by the US from its primary suppliers.

The decision to eliminate all exemptions from the 2018 metal tariffs and increase aluminium levies reflects a hardened stance on trade. Trump's actions extend beyond steel and aluminium, with separate tariffs in place for Canada, Mexico, and China, and threats of "reciprocal" tariffs against the European Union, Brazil, and South Korea. This comprehensive approach signals a determination to reshape international trade dynamics, potentially leading to further trade disputes and retaliatory measures.

The 2018 tariffs were widely seen as an aggressive strategy to force trading partners into concessions, and the current move could similarly lead to new trade disputes and retaliatory measures.