Trump’s latest tariff announcement comes just ahead of Prime Minister Narendra Modi’s US visit.
Feb 12, 2025 07:00 IST First published on: Feb 12, 2025 at 07:00 IST
US President Donald Trump has opened another front in the trade wars. On Monday, he signed orders levying 25 per cent tariffs on all steel and aluminium imports without any exception or exemption. Trump is also reported to have talked about unveiling “reciprocal tariffs” over the next few days. The tariffs on steel and aluminium will hurt a large swathe of countries — Canada, Mexico, Brazil and South Korea are among those likely to be affected – and have already evoked strong reactions. Canada’s industry minister is reported to have said that the country will give a “clear and calibrated” response, while Ursula von der Leyen, President of the European Commission, has said that the imposition of tariffs “will not go unanswered”.
It is possible that Trump will use the threat of imposing tariffs as a negotiating tool. A few days ago, he had signed orders imposing 25 per cent additional tariffs on Canada and Mexico and 10 per cent on Canada. However, the tariffs on Canada and Mexico were delayed by 30 days following talks between Trump and the leaders of the two countries, which led to some concessions by the latter. Considering that the levies on steel and aluminium will be effective from March, there may be room to manoeuvre yet. Trump may also view tariffs as an instrument to raise domestic production. However, tariffs could also trigger an increase in the cost of production of other goods, pushing up inflation. This will restrict the policy options before the US Federal Reserve. In its last meeting, as the Fed kept rates steady, it came under criticism from Trump. India accounts for a small share of US imports. In 2024, the country’s exports of primary steel to the US had touched $450 million, while exports of aluminium were $820 million. As per reports, there is also the concern that the higher tariffs in the US will push exporting nations to look for alternative markets, with India a likely target. An increase in supply, “dumping”, some have said, could further put pressure on prices. Over the past few days, the Nifty Metal Index and shares of steel companies have been falling, indicating investor concerns over the uncertainty. The Indian government will have to assess the situation carefully.
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Trump’s latest tariff announcement comes just ahead of Prime Minister Narendra Modi’s US visit. There are indications of the Indian government showing pragmatism in dealing with Trump. In the recent budget, duties on items such as high engine capacity motorcycles and high-end cars — items exported by the US — were cut. The government should leverage the goodwill Delhi enjoys in Washington, negotiate with the new administration, and take advantage of the opportunities that arise in an increasingly uncertain global environment.
