Trade War: The Donald Trump administration on Thursday said that it was moving ahead with tariffs aluminium and steel imports from Canada, Mexico and the European Union, nearly two months after giving them exemption. This could set the stage for a potential trade war — with friends. And even as US Treasury Secretary Steve Mnuchin said that Donald Trump could hold-off trade war with China, it seems to be back on as the White House announced that it will proceed with plans to impose 25% tariffs on $50 billion worth of Chinese exports to the US. Amid all these developments where does India stand?
Steel and Aluminium tariff
In March this year, the United States hiked import tariffs of 25% on steel and 10% for aluminium but exempted Canada and Mexico. Donald Trump said that dumping of steel and aluminium in the US market was “an assault” on the country. Recently, India launched a complaint against the decision at World Trade Organisation.
What’s going with the US, Canada and Mexico
Donald Trump has warning Canada that the North American Free Trade Agreement (NAFTA) renegotiation must be “a fair deal, or there will be no deal at all”. This is expected to escalate standoff between the neighbouring countries, which was triggered by the imposition of US tariffs on steel and aluminium. NAFTA is an agreement signed by Canada, Mexico, and the United States, creating a trilateral trade bloc in North America. Under this agreement, trade tariffs were eliminated progressively between the three countries.
In retaliation, the closest allies now plan to slap billions of dollars in tit-for-tat. The European Union said it would take steps to retaliate, Mexico vowed to impose duties on everything from US’ steel to cheese, and Canada announced that it will impose tariffs on as much $12.8 billion of steel, aluminium and other products from July 1.
Should India worry?
India’s steel and aluminium export to the US is low as compared with Canada, Mexico, Brazil, and China. India’s steel and aluminium companies’ exports to the US are as low as 2% and 6% respectively. However, any tariff slapped on any country exposes India to be a collateral damage in the trade war. “However, the impact could percolate through lower international prices due to excess supply from exporting countries while also leading to lower exports,” Ind-Ra said in a recent report.
India primarily exports steel to Italy, the UAE and South East Asian countries. With tariffs being imposed on Canada, Mexico, and EU, the countries could move to these countries as a potential market. This might create more competition for India, which could lead to price fall.
Recently, did India not only launch a complaint against the decision of the US to hike tariffs on steel and aluminium at the WTO but also proposed to raise duties by up to 100% on 20 products such as almonds, apple and specific motorcycles imported from the US if Washington does not back high tariffs.