Indian industry braces for flood of Chinese steel following US tariff hike

US trade deficit with China is $375 bn, or 46% of its total; If Trump forces his way, China could look at markets such as India to offload its products

US President Donald Trump's continuing rhetoric over hiking import duties on steel and aluminium products has had Indian industry worried. Steel makers in the country are gearing up to meet a possibile fallout of Trump's impending decision -- the flooding of the Indian market with Chinese steel.

Indian exports of steel and aluminium to the US remain low within the bouquet of total merchandise exports. While Indias steel exports to the US stood at only $330 million, a fraction of total exports to the US, export of finished steel products were $1.23 billion in 2016-17. Total exports of aluminium and aluminium products stood at $350 million. However, senior Commerce Department officials warned that as a result of any US action on steel, the possibility of Chinese steel being dumped in Indian will rise manifold.

United States President Donald J Trump had announced that within this week, his administration may slap a 25 per cent import duty on steel imports while inbound aluminium shipments to the United States may attract a 10 per cent import duty hike. 

Let's take a quick look at the largest Indian exports to the US in terms of foreign earnings and their current import duties. A majority of exports by the gems and jewellery sector and the pharmaceutical industry continue to be duty-free. The two industries are India's largest exporters. However, the growth of marine exports to the US has also come under fire from American producers who complain Indian companies are dumping their produce.

The US is India's largest export destination with $42.21 billion worth of shipments sent in 2016-17. Trump had earlier reminded his constituents of this fact, arguing that cheap Indian products undercut American ones even while lagging in quality.

Top Indian exports to US	Import duty	Value ($ bn)
Processed non-industrial diamonds	Nil	7.36
Retail pharmaceuticals	Nil	2.23
Gold jewellery set with diamonds	5.80%	1.42
Frozen Shrimps and Prawns	Nil	1.36
Light Petroleum Oils, preparations	7.00%	1.16
What Trump is targeting	Import duty	Value ($ mn)
Iron & Steel	Nil	63.00
Articles of Iron & Steel	2.30%	238.00
Aluminum & articles made from it	6.00%	127.81
Source: Commerce and Industry Ministry; Figures are for 2016-17; Total Merchandise exports to US: $42.21 bn, imports from US: $22.30 bn

However, the US is also India's second largest import source, with upwards of $22.30 billion worth of merchandise goods reaching the country from America. The resultant trade deficit of $19.90, however, is tiny compared to the US' trade deficit with some of its other trading partners. Take China for instance: It enjoyed a trade surplus of a staggering $375 billion, making up as much as 46 per cent of America's overall $810 billion merchandise trade deficit in 2017.

Possible changes in the tariff

It isn't currently known whether the Trump administration will only tax pure steel imports, of which the US is the largest global importer, or extend higher tariffs to all steel products. 

In mid-February, the US government had brought out its Section 232 report, investigating the state of imports for the two commodities. Apart from reiterating that the US was the largest global steel importer, it had pointed out that as of February, 2018, the country had 169 anti-dumping and countervailing duty orders in place on steel, of which 29 are against China.

It had also suggested two key things that will determine Indian exports hencerforth. One is an overall tariff of at least 53 per cent on all steel imports from 12 countries, including India. The other is the capping of all steel imports from a specific country at 63 per cent of its 2017 exports to the US.