A New Trade War on the Horizon
The imposition of new US tariffs on steel and aluminum has reignited concerns of a global trade conflict, reminiscent of the 2018-2019 tariff war. With China, Canada, and Mexico being the primary targets, retaliation from these nations was swift. As India watches from the sidelines, there is speculation about whether it, too, will face similar restrictions.
Global Trade and the US Tariff Strategy
While tariffs on industrial metals have dominated the conversation, their direct impact on global trade remains relatively small. Steel and aluminum together account for just 3% of total world trade, with US-bound exports forming an even smaller fraction—around 0.25% of the total. The most affected nation is Canada, given its significant dependence on the US for steel exports.
China, on the other hand, is unlikely to feel any substantial impact. Existing US tariffs on Chinese steel (47.5%) and aluminum (32.5%) have already limited trade, making additional duties less consequential. Despite these measures, China exported around $2.5 billion worth of metals to the US last year, a number that may see only a marginal decline due to the new tariffs.
The Bigger Picture: US Steel and Aluminum Markets
The US steel market is expected to feel the brunt of these tariffs more than aluminum. Steel prices are typically influenced by regional factors rather than global benchmarks. Currently, the US imports about a third of its total steel requirement, with a quarter of that coming from Canada. As tariffs take effect, domestic steel prices in the US are set to rise, impacting industries like construction and manufacturing.
However, this price surge could incentivize local steel production, as US-based producers have ample unused capacity. The situation is different for aluminum, where China remains the dominant player. Given that China accounts for 60% of global aluminum consumption—compared to the US’s modest 8%—the impact of US tariffs on global aluminum prices will likely be minimal.
India’s Position: Minimal Disruptions, Some Risks
For India, the direct impact of US tariffs is expected to be limited. The country exports only about 4% of its total steel shipments to the US, making it a minor player in this specific trade segment. Additionally, domestic steel demand has been strong, growing at an impressive 10-12% annually over the past three years.
However, the real challenge for India lies elsewhere. With major steel-exporting nations facing restrictions in the US, they may redirect their surplus to India, leading to a flood of cheap imports. China, in particular, could aggressively push its excess steel into the Indian market, potentially hurting domestic producers.
Aluminum exports tell a slightly different story. Around 40% of India’s aluminum output is exported, with 6-8% of that going to the US. This makes Indian aluminum producers more vulnerable to tariff-related disruptions than steelmakers. Nevertheless, India holds an advantage as a low-cost aluminum producer with ample bauxite reserves, ensuring competitiveness even in a challenging global market.
Macroeconomic Outlook: India on Stable Ground
Despite concerns about trade shifts, India’s macroeconomic fundamentals remain strong. Domestic demand continues to rise, cushioning any potential external shocks. However, a stronger US dollar—driven by inflation and a measured approach to interest rate cuts by the Federal Reserve—could put pressure on the Indian rupee.
In the coming months, India must stay vigilant against any surge in redirected exports from tariff-affected nations. Ensuring a balance between open trade and protecting domestic industries will be key to navigating this evolving global scenario. While US tariffs may disrupt certain markets, their overall impact on India will be far less severe than initially feared.
Author: This news is edited by: Abhishek Verma, (Editor, CANON TIMES)
Authentic news.
