US Tariff On Chinese Steel, An Opportunity For India

While the US pressed a 90-day pause button on country-specific reciprocal tariff, barring China, the baseline tariff of 10 per cent on all countries, along with a 25 per cent rate on steel, aluminium, auto and auto components, implemented in March will continue.

Along with the baseline 10 per cent tariff, the total tariff on steel and aluminium exports to the US therefore now effectively stands as 35 per cent.    

“With the exorbitant tariff on China, Indian steel makers can gain markets in the US. And this could be an opportunity especially for steel producers falling in the MSME sector. We are keeping a close eye on the situation and will do whatever can be done,” a government official said.

India's exports of iron and steel to the US was around $504 million during 2023.

The proposed Bilateral Trade Agreement (BTA) between India and the US could take up the issue of steel.

Canada, Brazil and Mexico are the top suppliers of steel and aluminium to the US. India’s main destinations for steel exports comprise UAE and European countries.  

Push To Export ‘Made In India’ Steel

The government is looking at increaseing measures to safeguard the domestic industry. It is taking several steps to rule out dumping of Chinese goods including steel. "We have applied for safeguard duties. There are many sectors where we have put restrictions," Commerce and Industry Minister Piyush Goyal recently told mediapersons.

Amid the BTA talks, India is also looking at new markets, including countries that come under Category C-- nations with added risks especially related to travel and payment. 

Finance Minister Nirmala Sitharaman, while presenting the Union Budget for 2024-25, reduced the Basic Customs Duty (BCD) from 2.5 per cent to nil on raw materials such as ferro nickel, which are needed for the steel industry.

Though India’s steel exports have been rising over the last few years, it fell in 2024, driven by uncertainties in the global markets. The dip in exports of the metal also impacted India’s outbound shipment of engineering goods. 

“We definitely see an opportunity for our steel makers. Considering that the 25 per cent tariff on steel and aluminium products is applicable universally for all countries, India is not singled out,” Pankaj Chadha, partner and CEO, Jyoti Steel Industries, and chairman, Engineering Export Promotion Council (EEPC) said.

However, Chaddha added that the increase in exports will not happen immediately, due to the continued uncertainties, despite the temporary pause in reciprocal tariffs. “The problem is the continued uncertainty which has increased risks. As exporters, we do not know how things will shape up after 90 days,” Chadha said.

At present, shipment of goods from Indian shores to the US on an average takes about 60 days.

Major Steel Suppliers To The US

Though Canada — the the largest supplier of steel to the US in 2024 — was outside the ambit of reciprocal tariffs due to the Canada-US-Mexico Agreement (CUSMA), Washington has slapped Ottawa with several tariffs on goods that are not covered under the trade pact.

Notably, imports of steel from China into the US is about 2 per cent of the country’s total needs. Sources said that India may be able to fill in the gap, as a result of which domestic steel producers may stand to gain.

The Federation of Indian Export Organisations (FIEO) said that timely conclusion of the India-US BTA is crucial to mitigate these tariffs and provide relief to Indian exporters. “Such an agreement could establish a structured framework for resolving tariff challenges, thereby reducing the likelihood of unilateral trade measures or retaliatory tariffs,” it said.

Meanwhile, the government is taking no chances. It is doing everything that it can to ensure that the US market remains open for India and the trade pact is inked.

In a recent meeting with the country’s exporters, Goyal asked the exporters not to reroute any kind of Chinese goods to the US.