Why Is India Seeking To Impose Retaliatory Tariffs On The U.S.?

India has decided to impose retaliatory tariffs on U.S. imports following renewed American duties on steel and aluminium. The move signals India’s assertive stance in global trade, aligning with its national economic and strategic interests.

Background of Tariff Tensions

• U.S. Tariff Reimposition: U.S. reimposed 25% tariffs on steel and aluminium imports in March 2024.
• Exemptions Withdrawn: No exemptions provided this time, unlike earlier rounds.
• Stated Rationale: Tariffs claimed to protect domestic industry from unfair trade practices and overcapacity.

India’s Response

• India’s WTO Notification: India notified WTO of plans to impose tariffs on $7.6 billion worth of U.S. goods.
• Estimated Duty Impact: Estimated impact of $1.91 billion in duties, matching damage to Indian exports.
• Effective Date: Measures became effective 30 days after notification, on May 9.

Historical Context

• Trump-era Tariffs (2018): Similar tariffs imposed by Trump in 2018—25% on steel, 10% on aluminium.
• GSP Removal and Retaliation: U.S. removed India from Generalised System of Preferences (GSP) in 2019, leading to Indian retaliatory tariffs on 28 U.S. items.
• Scope Expansion: Tariffs expanded in 2020 to include metal derivatives.
• Biden-era Easing: Tariffs eased under Biden (former President) in 2021-23, with reciprocal Indian measures.
• Tariffs Reinstated (2025): Tariffs reinstated in 2025 with Trump’s return.

India’s Stand at WTO

• U.S. Legal Justification: Cites “national security exception” under General Agreement on Tariffs and Trade (GATT) 1994 and Agreement on Safeguards (AoS).
• International Opposition: India, EU, China, UK reject U.S. claims, citing skipped mandatory consultations.
• India’s Retaliation Rights: India reserves the right to “suspend concessions” in response.

Impact on Indian Industries

• Export Competitiveness Hit: 2018 tariffs made Indian exports less competitive.
• Steel Export Decline: Steel exports to the U.S. fell 48.4% in FY20 and 46.7% in FY21.
• Market Share Reduction: The U.S. share of India’s steel exports dropped from 3.3% to 2.5%.
• Export Recovery (FY25): Exports rose 44.21% in FY25 (provisional), reversing FY24’s 42.3% decline.

Industry & Policy Reactions

• Industry Warning: The Steel Authority of India Limited (SAIL) warns of global volatility driven by U.S. protectionism.
• U.S. Fed Analysis: 2019 Fed report noted minimal job gains but input cost rise and retaliation damage from tariffs.
• India’s Global Image: Global Trade Research Initiative (GTRI) recognizes India as a rules-based, multilateral defender.
• Domestic Industry Support: Aluminium Secondary Manufacturers Association (ASMA) supports India’s assertive stance to protect its industries.

The Path Ahead

• Potential Reciprocal Tariffs: India may activate retaliatory tariffs in June if the U.S. fails to engage.
• Diplomatic Resolution: Consultations or U.S. withdrawal of tariffs could avert escalation.
• Strategic Shift: India increasingly uses WTO channels and calibrated retaliation as strategic tools.

Conclusion

India’s measured yet firm response to U.S. tariffs reflects a strategic evolution. By combining legal recourse with economic retaliation, it reinforces India’s commitment to fair trade while defending its national interests and industrial resilience.