India's Response to US Steel and Aluminium Tariffs
India is evaluating three potential strategies in response to the United States increasing safeguard duties on steel and aluminum to 50%, which has heightened bilateral trade tensions.
Options Under Consideration
- Retaliatory Tariffs:
- India may classify the US measure as a safeguard duty and impose retaliatory tariffs.
- There is a risk of continuous retaliation between the two countries.
- WTO Dispute:
- India could file a dispute with the World Trade Organization (WTO), following the example of other nations.
- Bilateral Talks:
- Continue negotiations with the US to reach a bilateral agreement.
- Commerce and Industry Minister Piyush Goyal emphasized the importance of maintaining good relations and resolving issues through dialogue.
WTO Notification
On May 9, India formally notified the WTO under the Agreement on Safeguards, expressing its intention to suspend concessions due to the US tariffs. India argues that the US tariffs violate WTO rules and entitle India to withdraw equivalent concessions.
Impact of US Tariffs
- The US tariffs are expected to affect $7.6 billion worth of Indian exports to the US.
- Washington would collect $1.91 billion in duties from these exports.
US Position
The US maintains that the tariffs are national security measures rather than safeguard actions and refuses to discuss them under the Agreement on Safeguards.
Alternative Strategy: Free Trade Agreement (FTA)
- Ajay Srivastava from the Global Trade Research Initiative suggests using ongoing FTA negotiations as a platform to resolve the issue.
- Proposes pushing for the elimination or reduction of Section 232 tariffs on steel and aluminum within the FTA framework.
Past Actions
- In June 2019, India imposed retaliatory tariffs on 28 US products, covering $240 million in trade, after the US removed India from its Generalized System of Preferences (GSP).
- These duties were removed in September 2023 following a bilateral agreement to resolve six ongoing WTO disputes.