India warns of retaliatory tariffs against US over auto parts safeguard duties

New Delhi: India has formally notified the World Trade Organization (WTO) of its plan to suspend trade concessions on certain US-origin products in response to Washington’s safeguard tariffs on Indian automobile parts, escalating trade tensions just days ahead of the anticipated announcement of a bilateral trade deal.

In a notification dated 3 July to the WTO’s Council for Trade in Goods, and published on Friday, India invoked Article 12.5 of the Agreement on Safeguards, stating its intention to impose retaliatory duties on select US products. The move follows the United States’ decision to extend safeguard tariffs—amounting to a 25% ad valorem increase—on imports of passenger vehicles, light trucks, and certain automobile components from India, effective 3 May.

“The proposed suspension of concessions or other obligations would take the form of an increase in tariffs on selected products originating in the US,” India’s WTO communication stated, noting that these retaliatory duties would match the impact of the US safeguard action. The estimated trade affected by the US action is valued at $2.9 billion, with India seeking to reciprocally recover $723.75 million annually through its proposed tariff measures.

Article 12.5 of the WTO Agreement on Safeguards allows a member country to notify its intention to suspend trade concessions if another member imposes safeguard measures without proper consultation.

A senior government official, on the condition of anonymity, said that India’s action was necessary to assert its WTO rights and prevent the normalisation of unilateral safeguard measures. “This sends a clear message that India will not allow unfair trade actions to go unanswered, particularly when due process under the WTO framework is bypassed,” the official said.

Earlier, Mint reported on 11 June that Washington had turned down India’s notice for WTO consultations on the US’s 25% tariff on auto components, asserting that the auto duties were imposed on national security grounds and therefore are not subject to multilateral trade rules, as per a WTO paper.

According to the WTO document, India maintained that the US measures, which were imposed without prior notification to the WTO or the mandatory consultations under Article 12.3 of the Safeguards Agreement, are inconsistent with the global trade rules enshrined in the General Agreement on Tariffs and Trade (GATT) 1994 and the WTO’s safeguard provisions.

Article 12.3 of the WTO Safeguards Agreement requires a country planning safeguard measures to consult affected members in advance, providing them an opportunity to discuss the proposed action and seek clarification.

While India has not yet specified the exact products or tariff rates, it has reserved the right to implement the retaliatory duties 30 days after the date of notification—effectively from early August. The government also retained the option to revise the product list and duty structure as needed, signalling flexibility in its retaliatory strategy, as per India’s WTO notice.

The timing of India’s notification is significant. It comes amid heightened expectations of a breakthrough in the ongoing India-US Bilateral Trade Agreement (BTA) negotiations, with both sides reportedly aiming for a first-phase announcement before 9 July. The move could be seen as an attempt by India to build negotiating leverage, especially as it pushes for the removal of US safeguard duties as part of the final deal contours.

Trade analysts say that India’s WTO notification is a legal and strategic step, signaling its readiness to retaliate against the US safeguard duties on automobiles and parts.

“By invoking Article 8.2 of the Safeguards Agreement, India is asserting its rights under international trade rules. The proposed retaliation—tariff hikes on US goods worth over $700 million—is proportionate to the injury caused,” said Ajay Srivastava, co-founder of the Global Trade Research Initiative, a trade research think tank.
 

“However, whether India will follow through remains uncertain. In a similar case involving US steel tariffs, India held back. Given the sensitive timing of the India-US trade deal and broader geopolitical considerations, this may be more of a warning shot than a guaranteed action,” said Srivastava.