The US plan to tax steel and aluminium imports may not hurt India’s exports much but it may prompt countries like China to divert a part of their supplies to India, raising chances of dumping here, industry and analysts said. Also, any ensuing trade war involving large players like China and the European Union that would seek to retaliate against the US curbs will potentially dent global trade growth and impact India as well, they said.
The government is already closely tracking US trade policies to gauge if the largest economy is going to impose curbs on products — including gems and jewellery, garments and textiles, and pharmaceuticals — where India has huge interest, a senior official told FE. It is also examining if the Trump administration’s move to impose a duty of 25% on steel and 10% on aluminium imports is consistent with the US commitments under the World Trade Organisation (WTO).
India’s steel and iron supplies account for just 4% of its overall goods exports to the US and aluminium just over 1%. Nevertheless, the tax casts a shadow over India’s growing supplies of certain steel and aluminium products in recent years and also hurts its policy to diversify its markets. India’s iron and steel exports to the US jumped to $2,352 million in 2016-17, against $1,638 million in the previous year. Such exports to the US touched $1,319 million in the April-November period of the current fiscal, up almost 43% from a year earlier. India’s aluminium exports to the US rose over 80% to $358 million between April and November this fiscal, albeit on a small base.
“If other countries retaliate against the US move, a trade war will follow, which will adversely affect the growth prospects of world trade. And that’s a worry. Also, some amount of diversion of items like steel from countries like China can’t be ruled out,” said Ajai Sahai, director general of FIEO.
Global trade in goods will continue growing above trend during the second quarter, the WTO’s quarterly outlook indicator showed last month. “The recovery of 2017 seems to be extending into the first quarter of 2018 at least, based on things like strong export orders, strong air freight and container shipping and other indicators. So it seems like there hasn’t been any slackening of momentum,” it said. The WTO has forecast overall growth in world goods trade will most likely be around 3.2%, compared with an estimated 3.6% in 2017.
“In India it would not have significant impact as of its total steel imports, US imports only 2% and the market for steel consumption in India is growing,” said Sanak Mishra, former managing director, SAIL’s Rourkela Steel Plant. According to Essar Steel, the US decision to levy tariff across board on steel products is not compliant with WTO regulations.