India Braces for Steel Import Surge as Trump's Tariffs Ripple Across Globe

India's steel industry is on high alert, fearing a surge in imports following U.S. President Donald Trump's imposition of a sweeping 25% tariff on all steel imports. The move, part of Trump's broader protectionist trade agenda, is expected to redirect excess steel production from major exporters like China, Japan, and South Korea towards India, potentially exacerbating an already challenging situation for domestic producers.

The new U.S. tariffs, which took effect on Wednesday, reverse the Biden administration's policy of granting exemptions to certain allies. The Trump administration argues that these exemptions created loopholes that were exploited by China and others, undermining the tariffs' intended effect of revitalizing the American steel industry. The tariffs have already triggered retaliatory measures from the European Union and Canada, escalating global trade tensions.

India, which became a net importer of steel in the fiscal year ending March 2024 after years of being a net exporter, is particularly vulnerable. The country has already seen a significant influx of cheaper finished steel, primarily from China, driving down domestic prices. The cost of ex-Mumbai hot-rolled coil (HRC) steel, a key benchmark, fell nearly 15% in 2024, according to Nikkei Asia, citing data from Argus Media.

S&P Global Ratings warned last week that Indian steel prices could fall by as much as 3,000 rupees (6%) per tonne in a "downside scenario" if the U.S. tariffs lead to a significant shift of exports towards India. Japan and South Korea, which are major steel exporters to India, may be compelled by the US Tariffs to increase exports to India. Crisil, a market intelligence provider, forecasts a price drop of 6% to 8% in the next fiscal year if no safeguard measures are implemented.

"The Indian steel demand continued to grow, but the momentum has eased and domestic prices remained under pressure due to cheap imports," T.V. Narendran, CEO of Tata Steel, said in an earnings calls in January. Indian steel producers are now calling for safeguard duties – temporary tariffs – to protect the domestic market. Steel and Heavy Industries Minister H.D. Kumaraswamy told Reuters in February that the government is considering a safeguard duty of 15% to 25%.

The situation is complicated by existing trade agreements between India, Japan and South Korea, which exempt them from basic customs duties. A safeguard duty would be a way to address the potential influx of steel from these countries. India has used this tool before, imposing a 20% safeguard duty in 2015, which led to a complaint from Japan to the World Trade Organization.

India's trade relations with the U.S. have been strained. India's trade minister recently traveled to Washington to seek tariff exemptions but was unsuccessful. India had previously preemptively cut tariffs on some U.S. goods, including Harley-Davidson motorcycles, in an attempt to improve relations.

While Nomura analyst Jashandeep Chadha acknowledged the potential for increased imports, he also noted that the impact might be less severe than feared, citing China's declining steel exports to the U.S. and the difficulty of replacing specialized steel products from Japan and South Korea.

The situation in India is a microcosm of the broader global trade tensions triggered by Trump's protectionist policies. As major economies retaliate and adjust to the new tariffs, the ripple effects are being felt across the world, creating uncertainty and volatility in global markets.