India likely to seek removal of US steel tariffs in trade talks rather than immediate retaliation

Mint

2 days ago

New Delhi: India may not retaliate immediately against the US over its steep tariffs on steel and aluminium, and may instead seek their removal through the ongoing talks on a bilateral trade agreement (BTA), two people familiar with the matter said.
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India, in the first instance, will try to negotiate the issue between 5 June, when a US delegation is expected in New Delhi for talks on the trade agreement, and 8 June, the deadline for India to respond at the WTO.
However, India will reserve its right to retaliate.
A US notification to the World Trade Organization (WTO), circulated on 23 May, rejected India's claim that the tariffs were safeguard measures under WTO rules. The WTO allows countries to take 'safeguard' measures to protect domestic industries from a surge in imports.
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The BTA talks are in their final stage, with both sides showing flexibility and making positive progress. Against this backdrop, India is expected to use the trade negotiations to press for a rollback of the Section 232 duties as part of a broader package aimed at improving market access. Section 232 is a domestic US legal provision that allows the president to use tariffs on imports deemed to threaten national security.
A high-ranked US delegation is set to start a second round of face-to-face talks with their Indian officials from 5 June in a bid to finalize the deal.
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New Delhi had, earlier this month, informed the WTO of its intention to suspend concessions under the Safeguards Agreement in response to the Section 232 tariffs the US imposed in 2018 on national security grounds. This was in response to the 10 February US decision to impose a 25% tariff effective 12 March and its move to subsequently raise it to 50%.
India had argued that these duties amounted to safeguard measures and warranted equivalent countermeasures.
However, Washington dismissed the claim, insisting that the duties were not safeguard actions but national security measures, and therefore outside the scope of the WTO's Safeguards Agreement.
Despite having legal and diplomatic tools at its disposal—such as launching a WTO dispute under the General Agreement on Tariffs and Trade (GATT) rules or imposing retaliatory tariffs without WTO authorization—India appears to be opting for a more pragmatic path.
'We have room to discuss all these issues in the ongoing BTA talks. If things don't get resolved there, we will still have the option to exercise our rights through international platform," said the first among the two persons mentioned above.
"It's a matter of concern for us. We are reviewing all the options. The right move will be taken at the right time. India's position is not what it used to be, but we believe in handling such critical issues with a sense of perpetuality. We will raise our concerns through structured bilateral engagement instead of fueling any immediate escalation in the midst of ongoing trade talks," the second person said.
Both persons spoke on the condition of anonymity. A query sent to the commerce ministry remained unanswered till press time.
Ajay Srivastava, co-founder of Global Trade Research Initiative (GTRI), a think-tank, said, 'While the EU, China, and Canada had resorted to unilateral retaliation, India may be better served by securing a negotiated outcome as part of the FTA."
'Given the fragility of the WTO's dispute settlement mechanism and the US's refusal to recognize adverse rulings on national security measures, a negotiated path may offer more certainty and a quicker resolution," said Srivastava.
According to the US response, the tariffs were imposed under Section 232 specifically for national security reasons, covered by the essential security exception under Article XXI of the General Agreement on Tariffs and Trade (GATT) 1994—not under Article XIX or the WTO safeguard rules.
Article XIX is used for economic safeguard measures during import surges, while Article XXI is used for national security exceptions.
This distinction matters because Article 8.2 of the Safeguards Agreement only allows a country to suspend concessions if a safeguard measure exists—which the US claims is not the case here.
However, Indian exporters have expressed deep concern over the potential loss of key metal product shipments worth over $4.5 billion annually, after US President Donald Trump on Friday announced a sharp escalation in import duties on steel and aluminium, doubling existing tariffs to 50% starting 4 June under the national security provisions of Section 232.
Earlier, the tariff on steel and aluminum was increased to 25% on 10 February and came into effect on 12 March.
'It's unfortunate that while BTA negotiations are going on, such unilateral tariff increases should be done. It only makes the work of the negotiators much more difficult and complicated," said Pankaj Chadha, chairman of Engineering Export Promotion Council (EEPC), a commerce ministry body.
'This will definitely impact engineering exports, which are about $5 billion under this head," said Chadha.
However, the European Commission has announced its plans to retaliate against President Donald Trump's decision to double tariffs on imported steel and aluminium.
'The US decision to double steel tariffs to 50% is a protectionist move aimed at safeguarding domestic steelworkers, but it will inflict shockwaves across global markets. India is one of the major exporters to the US market, and a 54% tariff on China has given India a better opportunity to export to the US," said Panckaj N. Umrania, executive director, KND Steel, a steel processing company.
'Now, with a 50% tariff on Indian steel, the competition will become more intense, and its ripple effects could be troublesome for small players in India," Umrania said.
For India, the impact is immediate and concrete. In FY25, India exported $4.56 billion worth of steel, aluminium, and related products to the US, including $587.5 million in iron and steel, $3.1 billion in articles of iron or steel, and $860 million in aluminium and its products.
These exports will now face steep duties, undermining competitiveness in America's already pricey steel market, where rates are projected to shoot up to $1,180 per tonne—far above EU and Chinese benchmarks, as per a GTRI paper.
Industry leaders are also pointing to what they see as discriminatory exemptions. 'The UK has been given exemption from Section 232. The same exemption should also be given to India, possibly with some Tariff Rate Quota (TRQ) restrictions," Chadha said, even though the US does not currently operate a TRQ regime for Indian steel.
The economic impact of these higher tariffs is expected to be significant. US steel prices are already elevated, at around $984 per tonne—far above European prices of $690 and Chinese levels of $392.
In FY2025, India exported metal products worth $4.56 billion to the US, while imports from the US in the same category stood at $2.05 billion, resulting in a trade surplus of over $2.5 billion for India. The largest share of exports comprised articles of iron or steel at $3.1 billion, followed by aluminium and related products at $860 million, and iron and steel at around $587.5 million.
In contrast, India imported $910.6 million worth of aluminium products and $838.3 million worth of iron and steel from the US, but bought relatively little—just $304 million—in finished articles of iron or steel.