What the New U.S. Tariffs Mean for Indian Steel? The Long-Term Impact and Future Outlook

The recent 26% US import tariff on Indian goods has stirred conversations across industries—from pharmaceuticals to agriculture. While the tariffs have been temporarily paused till July 9 for most countries, they have created anxiousness across industries amid fears of escalating a trade war. However, there's one sector that's both relieved and cautious: steel.

India’s steel industry is no stranger to global headwinds. The United States had recently decided to impose a 10% universal import tariff. While Indian steel products have been spared from additional tariffs under the U.S. "reciprocal trade" plan, the base duty still matters.

So what does this mean for the Indian steel market in the long run? Let’s break it down.

The Big Picture: What Happened?

This move comes as part of US President Donald Trump's broader trade policy to reduce the US trade deficit with key partners like India. Under a two-tier system:

• All US imports face a base tariff of 10%.
• Countries with trade surpluses, like India, face a higher 26% tariff.

Trump claimed the move is "fair" since India imposes tariffs as high as 52% on certain US goods. India, however, is still studying its long-term response and is in talks with trade partners to find common ground.

Impact on India’s Steel Industry: Relief with a Warning Label

Now, let's talk steel.

The good news? India’s steel and aluminium exports were exempted from the additional 26% tariff. That’s a big sigh of relief.

But not everything’s smooth sailing.

Here’s why:

• A 25% tariff still applies to Indian steel under Section 232 of US trade law.
• Indian steel exports to the US aren't massive, so the direct impact is limited.
• However, the real risk lies elsewhere—in cheap steel flooding India from other countries.

A Shift in the Export Game

Indian steel exporters have enjoyed consistent demand from the U.S., especially for semi-finished and value-added products. But a 10% tariff reduces price competitiveness.

Over time, U.S. buyers may:

• Look inward for cheaper domestic options
• Shift preferences to suppliers from FTA countries like Mexico or Canada

This won’t completely shut the door on Indian exports—but it does make the game harder.

How the industry is adapting:

Exporters are now expected to focus on regions like the Middle East, Europe, and Southeast Asia, and push more high-margin products like coated or alloy steel.

The Real Threat: Trade Diversion from Asia

Here’s a ripple effect many are watching:

Countries like China and Vietnam are also affected by U.S. restrictions. When the US slaps tariffs on countries like China, South Korea, or Vietnam, they often redirect their exports to countries like India. So, these countries may start diverting their excess steel to India.

That means:

• Oversupply in the Indian market.
• Indian steelmakers face stiffer competition from imported low-cost steel.
• Domestic prices could drop—by as much as ₹3,000 per ton (approx. 6%).
• Smaller steel producers may struggle to stay profitable.

To counter this, India is considering safeguard duties (like a proposed 12% tariff on some steel products) to shield local manufacturers. This trend might continue if the global excess supply worsens.

But It’s Not All Bad News

There are also silver linings for Indian steel:

• India’s lower tariffs compared to other Asian nations could make it a more attractive exporter in Europe and Southeast Asia.
• Countries looking for alternatives to US-bound steel might now turn to India.
• Downstream industries in India, like construction and auto, could benefit from cheaper input costs if imported steel prices stay low.

How Indian Steelmakers Are Responding

The uncertainty is making steelmakers more cautious. Some had planned major expansions in flat-rolled and export-grade capacities—but now, those plans might be paused or scaled down.

However, there’s a silver lining.

India’s domestic demand story is strong. With big-ticket projects under schemes like Gati Shakti, PM Awas Yojana, and Smart Cities, local consumption could offer a buffer.

Here are some major actions being taken:

• Shifting Focus: Companies are now eyeing European and Southeast Asian markets more aggressively.
• Efficiency Push: To stay competitive, steel producers are looking to cut costs, improve processes, and move toward value-added products.
• Trade Protection: The Indian government may tweak policies further to protect domestic steel from unfair dumping.

Trade Talks Could Change the Game

While India isn’t retaliating with counter-tariffs, it is in active talks with the U.S. over a broader trade agreement.

If successful, we could see:

• Tariff revisions for key sectors like steel
• Better access to U.S. markets for Indian manufacturers
• A more balanced and predictable trade relationship

For now, the wait continues—but negotiations are underway.

The Long Game: Going Green and Going Wide

There’s one more major trend that could reshape India’s steel story—sustainability.

As the world leans into cleaner manufacturing, Indian companies will have to invest in:

• Low-emission steelmaking (like hydrogen-based processes)
• Energy efficiency
• Better ESG reporting

This might sound like a challenge today, but in the long run, green steel could become a premium product, giving India a new edge in global markets.

Final Take: Challenges Ahead, but So are Opportunities

The US tariffs are both a challenge and an opportunity for India. Yes, U.S. tariffs bring short-term pain—but they’re also a push to innovate, diversify, and future-proof the industry.

For steel:

• It’s less about losing business in the US.
• And more about managing a new wave of competition at home.

What lies ahead depends on how quickly India adapts through smart trade deals, targeted safeguard duties, and a sharper export strategy.

For now, Indian steel stands strong—but it’ll need to stay flexible to keep that edge.

Indian steelmakers now face a choice:

Play defence, or reimagine their export strategy, product lines, and sustainability roadmap.

The smart ones will do all three.

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FAQs

Q1. Will Indian steel exports to the US drop because of tariffs?

Not significantly. Exports to the US were already small, and the 26% tariff doesn’t apply to steel. But the existing 25% Section 232 tariff and a baseline 10% tariff still pose a challenge.

Q2. Could cheap steel from other countries hurt Indian producers?

Yes. Countries hit by US tariffs may reroute their steel to India, increasing local supply and pushing prices down.

Q3. Is the Indian government doing anything to protect local steelmakers?

Yes, safeguard duties and policy reviews are being considered to manage import surges and prevent market disruption.

Q4. Can India gain from the US tariff situation?

With the right strategy, India can attract new buyers and increase exports to countries looking for alternatives to Chinese and Vietnamese steel.

Q5. Will steel prices drop in India?

Yes, steel prices might decrease in India. Industry experts predict up to a 6% fall in prices due to increased competition and trade diversions.