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India Braces for Impact from Aluminium and Steel Tariffs

India foresees a ‘slight impact’ from the decision of U.S. President Donald Trump to escalate tariffs on aluminium and steel products, noted the Indian Union Steel Minister on Monday (June 2, 2025). President Trump has indeed declared his intention to raise the tariffs on steel and aluminium imports to 50% from the current 25%. This decision has caused a downturn in steelmakers’ stocks in major Asian exporters such as South Korea and Vietnam.

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Approximately one-fourth of all steel utilized in the U.S. is imported. Main sources for these imports are neighboring countries like Mexico and Canada, along with close Asian and European allies like Japan, South Korea, and Germany. India’s contribution to the U.S. steel market is relatively small.

The Indian Steel Minister commented during a press conference in New Delhi that there will be ‘some impact… We aren’t making large-scale exports (to the U.S.)’. Though any effects on India may be relatively inconsequential because of these limited exports, the global repositioning of steel trade routes following these increased tariffs could alter this outlook.

Fitch ratings agency presented another side to this scenario in March. It suggested that if countries with higher exposure to the U.S. looked for more lenient markets to redirect their steel shipments, this could impact Indian steelmakers and steel prices.

The potential realignment of steel trade if export nations attempt to circumvent the heightened U.S. tariffs creates a potential for market instability. This is especially true for those nations less integral to the U.S. market but still participating in the global steel trade, such as India.

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As the President’s pronouncement last week indicates, U.S. tariffs on imported steel and aluminium are due to double. Although the full implications of such a move are yet to be seen, stock market reactions were immediate, with significant drops in the stock value of steel makers in Vietnam and South Korea.

Currently, the largest amounts of steel imported into the U.S. come from Mexico, Canada, and a handful of other allied countries. These allies, including Japan, South Korea, and Germany, have managed to carve substantial niches in the American steel market, leaving less market share for countries like India.

The tariffs certainly pose potential issues on a larger global scale. Countries that rely heavily on exporting these materials to the U.S may have to divert their operations to softer markets. Already there has been speculation from financial institutions such as the Fitch ratings agency about the possible effects of such diversions on countries with smaller exposure, like India.

The Fitch ratings agency argue that the new tariffs could indirectly affect India. This is because nations with heavy exposure to the U.S. may start looking for new, more lenient markets, which may lead them to India. Such redirections could impact not only the steel prices but also the profits of Indian steel manufacturers.

The preference of the U.S to import steel from neighboring countries and strategic allies has put countries like India in a lesser role in the U.S steel market. Perhaps only a limited effect will be felt by India due to the rise of U.S. steel tariffs, but it remains to be seen how this will shift the global dynamics of the steel market.

It should be made clear though, even with the revised tariffs; India will continue to export to the U.S., albeit not at a broad scale. Thus, acknowledging the impact, albeit minor, is equally important from an economic standpoint.

The unfolding scenario suggests a potential market shift where steel exporters having significant U.S. dealings may look elsewhere to compensate for lost American business. Meanwhile, Indian steelmakers are bound to experience the ripple effects of these shifts regardless of their minor direct involvement in the U.S. market currently.