Does Donald Trump’s 25% tariff on steel and aluminium put Indian steelmakers at risk?

United States President Donald Trump on Sunday said that he would impose 25 per cent tariffs on steel and aluminium imports into America, reported the news agency AFP.

Donald Trump imposed similar tariffs in 2017 during his first term as president, believing that the US was facing unfair competition from Asian and European nations, according to the report. 

The newly imposed 25 per cent tariffs will be applicable to “everybody” which includes countries such as Canada, Mexico, allied nations, and other large trading partners, as per the report.

France's foreign minister, Jean-Noel Barrot, on Monday, said that the European Union would counter with any tariffs imposed on it.

“There is no hesitation when it comes to defending our interests,” Barrot told TF1 television, as per the agency report. 

How does US gain from tariffs?

According to a News18 report, the United States seeks to increase domestic production through tariffs on imports from other countries.

The news portal cited a Bloomberg report quoting Morgan Stanley, which said building new metals capacity in the US will not happen quickly.

“Constructing and ramping up new smelters/mills can take three or more years,” according to Morgan Stanley analysts. “Hence, any import tariffs applied to metals or mined products are likely to result in higher domestic prices for local buyers of these materials,” reported the news agency. 

What will be the impact on India?

Mint reported earlier in September 2024, citing a Reuters report, that the US' 25 per cent tariffs on China would affect India as it would become a dumping ground for metal imports, impacting the stability of the domestic steel market.

“The increased trade remedial tariffs on Chinese steel by the US is further going to impact the Indian steel industry adversely with diversion directed to India,” Alok Sahay, secretary general of the Indian Steel Association (ISA), told the news agency. 

India is the second-largest producer of crude steel. The nation became a net importer of the commodity in the financial year ended March 2023-24, when the overall finished steel imports hit a six-year high at 3.7 million metric tonnes, as per the report.

This instance, driven by the weak steel demand in China, fuelled producers to offload the surplus stock by offering competitive prices to Indian buyers.

“The surge in imports at predatory prices, due to diversion and due to major reduction in steel consumption in China, is a double whammy for us,” Sahay was quoted as saying in the Reuters report.