India eyes retaliation as US rejects WTO notice

Mint

2 days ago

The US has rejected India's May 9 notice at the World Trade Organization that proposed retaliatory action against Washington imposing steep import tariffs on steel and aluminium and said its actions were not safeguard measures, which is why it would not hold any discussion with New Delhi on the matter, people in the know said on Sunday.
Under the current circumstances, India may retaliate by proportionately suspending concessions given to American imports (for example almonds and walnuts) and levy higher customs duties on metals coming from the US, said the people cited above, requesting anonymity. The Indian notice was against the US's February 10 decision to impose 25% levies on all imports of steel and aluminium effective from March 12. Now, the matter has been aggravated further as the Trump administration on May 30 doubled tariffs on the metals to 50% effective from June 4, citing national security.
Against the US measure to hike import duties on steel and aluminium to safeguard American metal industries, India on May 9 formally notified WTO that it could suspend 'concessions and other obligations' granted to the US 'after the expiration of 30 days from the date of this notification', which would be June 8.
Reacting to India's notice, the United States on May 22 informed WTO that India's proposed retaliation was not consistent with the multilateral trade rules. Washington said the US tariffs on metals were 'not safeguard' measures. 'Accordingly, there is no basis for India's proposal to suspend concessions or other obligations under Article 8.2 of the Agreement on Safeguards with respect to these measures,' it said in its latest communication to WTO.
On grounds that the tariffs are not safeguard measures, the US also declined to discuss and resolve the dispute with India, leaving the ball in New Delhi's court. 'The United States will not discuss the Section 232 tariffs under the Agreement on Safeguards as we do not view the tariffs as a safeguard measure,' the American communication to the multilateral body added.
While India's commerce ministry did not respond to a query on this matter, people in the know said India may retaliate unless the US agrees to a preferential treatment for India on these metals under the ongoing talks for an early deal (first tranche) within the proposed Bilateral Trade Agreement (BTA). Both countries are making efforts to conclude an early harvest deal by this month and a negotiating team from the US is expected to visit India this week, they said.
Experts said high tariffs on steel and aluminium by the US are of critical importance to India. 'For India, the consequences are direct. In FY25, India exported $4.56 billion worth of iron, steel, and aluminium products to the US, with key categories including $587.5 million in iron and steel, $3.1 billion in articles of iron or steel, and $860 million in aluminium and related articles. These exports are now exposed to sharply higher US tariffs, threatening the profitability of Indian producers and exporters,' said Global Trade Research Initiative (GTRI) founder and former Indian Trade Service officer Ajay Srivastava.
'India has already issued a formal notice at the WTO signalling its intention to impose retaliatory tariffs on US goods in response to the earlier steel tariffs. With (President Donald) Trump now doubling the tariffs, it remains to be seen whether India will carry out the retaliation, by increasing tariffs on certain US exports within a month,' he added.
Hindustan Times reported on May 14 about India proposing to levy retaliatory import duties on American goods proportionately in response to the United States' imposing safeguard tariffs on Indian steel and aluminium. 'The safeguard measures would affect US$ 7.6 billion imports into the United States of the relevant products originating in India, on which the duty collection would be US$ 1.91 billion. Accordingly, India's proposed suspension of concessions would result in an equivalent amount of duty collected from products originating in the United States,' India's May 9 notice to WTO said.
The US, however, maintained at WTO that its tariffs on steel and aluminium are based on national security considerations and not 'safeguard measures' as claimed by India. 'Such disputes at WTO are common and routine. Without an effective appellate body at the multilateral forum, disputes have no real significance,' one of the persons mentioned above said.
The second person said this is a vexed issue. The previous Joe Biden administration in 2018 had imposed a 25% tariff on certain steel and a 10% levy on aluminium items on grounds of national security. That was retaliated to by India in June 2019 when it imposed customs duties on 28 US products such as almonds and walnuts, besides filing a complaint at WTO. Later, the two sides, however, decided to resolve the dispute amicably through mutually agreed solutions (MAS). Under the agreement in June 2023, the US agreed to grant market access to steel and aluminium products under the exclusion process of Section 232 of the Trade Expansion Act 1962 and India agreed to remove the additional duty (retaliatory tariffs) on certain American products. MAS is a mechanism under WTO where its members can resolve disputes amicably without going through the formal process of a settlement mechanism.
(This article was first published in Hindustan Times)