Whalesbook
Lingering Tariffs Cloud India-US Trade Accord
New Delhi and Washington have finalized a trade agreement aimed at reducing reciprocal tariffs, yet a substantial portion of Indian exports remains subject to significant duties. An analysis indicates that roughly $8.3 billion, or over 10 percent, of India's exports to the United States will still confront tariffs of 25 percent or more. These persistent duties stem from Section 232 of the U.S. Trade Expansion Act of 1962, measures justified on national security grounds and largely untouched by the recent bilateral accord. While reciprocal tariffs have been lowered to 18 percent, these pre-existing "national security" tariffs continue to affect key Indian industries.
The Section 232 Imposition
The Section 232 tariffs, initially implemented by the Trump administration, target strategic goods deemed critical for national security. These measures are rooted in investigations and recommendations rather than emergency powers, explaining their resilience across various trade agreements. The affected products include steel, aluminum, automobiles, timber, copper, and certain machinery. For India, these tariffs represent a significant impediment, particularly as the U.S. is a crucial market for these specific categories, accounting for 22.7 percent of their total U.S. sales compared to 18.3 percent for all Indian exports.
Concentrated Impact on Key Sectors
The economic burden of these Section 232 tariffs is disproportionately concentrated in a few sectors. Automobiles alone constitute the largest segment of affected exports, with shipments valued at approximately $3.9 billion remaining under scrutiny. Steel exports follow closely at around $2.5 billion, with aluminum shipments contributing nearly $800 million. Together, these three categories represent over 85 percent of the Indian export value exposed to these duties. This heavy reliance means that even moderate trade barriers can exert considerable pressure on Indian producers' margins and competitiveness. For instance, the U.S. accounted for about 34 percent of India's global steel exports and 37 percent of its aluminum exports in 2024, underscoring the strategic importance and vulnerability of these trade flows.
Navigating Persistent Trade Headwinds
The persistence of Section 232 tariffs underscores the complex and often protectionist nature of recent U.S. trade policy. Despite broader efforts towards economic partnership, these duties continue to pose challenges. Reports suggest that Indian exporters face disadvantages compared to competitors from countries with preferential tariff rates or exemptions. This situation compels Indian producers to explore geographic diversification and enhance cost efficiencies to mitigate the impact. Looking ahead, the effectiveness of ongoing trade negotiations and the potential for further policy shifts will be critical in shaping the future of India-U.S. trade relations, especially for sectors heavily dependent on the American market.