Focus

INTRODUCTION

The U.S. has increased Section 232 tariffs on steel, steel products, and aluminium from 25% to 50%, posing a major challenge for Indian exporters. These tariffs, originally imposed under Section 232 of the U.S. Trade Expansion Act citing national security, have already disrupted global supply chains since 2018. In 2024 alone, the U.S. imported around US$ 33 billion worth of steel, US$ 52.65 billion of steel products, and US$ 28.3 billion of aluminium and related goods, making it one of the world’s largest importers of these materials. Any increase in tariffs will only heighten trade tensions, raise costs for U.S. businesses, and adversely impact key exporting countries, including India.

For India, a key supplier of steel and aluminium products to the U.S., the recent doubling of Section 232 tariffs to 50% has emerged as a major trade barrier—particularly for its micro, small, and medium enterprises (MSMEs) that form the backbone of the country’s metal export ecosystem. Unlike the United Kingdom, which secured exemptions through its Free Trade Agreement (FTA) with the U.S., India remains fully exposed to these elevated duties. This disparity is especially concerning as other exporting nations—benefiting from geographical proximity to the U.S., lower power tariffs, and access to cheaper raw materials—are now better positioned to fill the supply gap in the American market.

In this context, the ongoing Bilateral Trade Agreement (BTA) negotiations between India and the U.S. have become critically important. Without timely intervention and negotiated exemptions, India’s metal sector could face erosion of market share, reduced export earnings, and a slowdown in industrial employment and investment—at a time when global trade recovery remains fragile.

CONTENT-BASED DUTY

Under the updated Section 232 Proclamation signed on June 3, 2025, the U.S. government introduced a content-based tariff structure. Unlike earlier blanket tariffs, this approach targets only the steel and aluminium content within imported goods, rather than the entire product value.

Key Implication

• The steel or aluminium portion of a product is now subject to a 50% tariff.
• The remaining non-metal portion of the product is not subject to Section 232 tariffs, as clarified under HTSUS heading 9903.01.33 and related guidance (see 90 FR 15041, CSMS #64680374 and #64701128).

FAQ: Content-based duty

Q1: What happens if the importer does not know the country of melt and pour for steel content?

A: For derivative steel products, importers may report “OTH” (Other) if the country of melt and pour is unknown.

Q2: What if the country of smelt or cast is unknown for aluminium products?

A: For derivative aluminium, importers may temporarily report any country other than the U.S. if the country of smelt or cast is unknown. A post-summary correction can be submitted once the actual country is known.

Q3: How is the value of steel or aluminium content determined?

A: The value must be calculated according to the Customs Valuation Agreement (19 U.S.C. § 1401a). This is typically the price paid or payable for the steel/aluminium content, excluding international shipping and insurance costs. Normally, this is based on the invoice from the seller of the metal content.

Q4: What tariff applies to the non-metal portion of the product?

A: The non-metal portion is not subject to Section 232 tariffs and is assessed under its applicable HTSUS classification, excluding reciprocal tariffs.

SECTION 232 PRODUCT SEGMENTS

Total exports of steel, steel products, and aluminium from India to the U.S. were about US$ 4.56 billion, which is a rise of 8% compared to the previous year. Iron and steel exports grew strongly by 24%, going up from US$ 475.6 million to US$ 587.5 million. Steel products (such as pipes, tubes, structures, etc.) made up the largest share and rose by 12%, reaching US$ 3.1 billion. However, aluminium exports fell by 9%, coming down from US$ 952.6 million to US$ 867.2 million.

This shows that while steel exports are doing well, aluminium exports are facing some difficulties. If the U.S. raises tariffs to 50%, it could hurt both these sectors and make it harder for Indian exporters to compete.With the U.S. already having raised tariffs to 50%, it poses significant challenges for both these sectors, making it increasingly difficult for Indian exporters to remain competitive.

Table1: India’s export of steel, steel products and aluminium (USD Million)

a) Steel (Chapter 72)

As per data from Trademap, India accounted for just 1.5% of the United States’ total steel imports in 2024, ranking 16th among global suppliers. In contrast, top exporters to the U.S. include Canada, Brazil, Mexico, South Korea, and Germany. Despite India being a leading global steel producer, its presence in the U.S. market remains limited.

b) Steel Products (Chapter 73)

In the case of steel products such as pipes, tubes, fittings, and structures, China is the leading exporter to the U.S., with over 25% share of total imports in 2024. India ranks 6th, with a share of 5.4%, reflecting modest penetration.

Table2: U.S. Steel Imports by Top Suppliers (USD Million)

PROBABLE IMPACT ON INDIA’S EXPORT OF STEEL, ALUMINIUM AND THEIR DERIVATIVES

We have checked the export figures for the affected sectors—steel, steel products, and aluminium—for the last two financial years. We have also reviewed the export performance specifically for the affected tariff lines on which Section 232 tariffs are applicable.

In Chapter 72 (Iron and Steel), exports under affected tariff lines grew by 14%, reaching US$296.4 million in 2024–25. These affected lines accounted for 50.5% of total exports in this chapter, indicating moderate exposure to the tariffs.

For Chapter 73 (Products of Iron and Steel), exports of affected tariff lines rose by 11% to US$2,857.8 million, making up a substantial 91.7% of the total exports in this category. This reflects a high concentration of exports in tariffimpacted lines.

In Chapter 76 (Aluminium and Products), exports under affected tariff lines saw a slight decline of 2%, totalling US$664 million in 2024–25. Despite the dip, these lines still represented 77.2% of the chapter’s total exports, showing significant tariff sensitivity.

Export Projections (2025–26)

Table 6: Projections for 2025-26(USD Million)

This analysis focuses on exports of tariff lines affected by the USA’s section 232 tariffs, which now face a 50% tariff. Unlike Canada, Mexico, and the UK, India is not exempt, disadvantaging its exporters. These low-margin, price-sensitive products are highly substitutable and vulnerable to tariff hikes. Indian exporters, especially MSMEs, are hesitant to trade with US customers due to policy unpredictability. For projected export figures for 2025-26, we assumed three scenarios: baseline impact (30%), moderate impact (50%), and worst-case impact (80%). The following table shows projections for steel, steel products, and aluminium:

The steep tariff hike will likely erode India’s competitiveness in the U.S. market, potentially costing over US$ 3 billion in exports. This highlights the urgent need to finalize the India–US Bilateral Trade Agreement with clear tariff commitments and to negotiate exemptions or quota-based arrangements as extended to key allies.

INDIA’S RESPONSE AT THE WTO TO U.S. SECTION 232 TARIFFS

On May 9, 2025, India formally notified the WTO of its intention to suspend trade concessions extended to the U.S., in response to the continued imposition of 25% tariffs on Indian steel and aluminium under Section 232 of the U.S. Trade Expansion Act.

India views these tariffs as unjustified and inconsistent with WTO obligations, arguing that they are disguised protectionist measures rather than genuine national security safeguards. Potential Indian Retaliation (Post June 8, 2025)

India has indicated it may retaliate by:

• Suspending WTO concessions to the U.S.
• Imposing higher tariffs on selected American goods such as almonds, walnuts, apples, and certain metals

OBSERVATIONS AND RECOMMENDATIONS

• Precedence of exemptions from Section 232 under existing FTAs

  Initially when the US had brought in the Section 232 tariffs on steel, aluminium and their derivatives, dated March 18th, 2025, there was no mention of any exemption for its FTA partners. Subsequently on April 29th, US announced exemption under USMCA which includes Canada and Mexico. Following the signing of the FTA with UK, US announced exemptions for UK too. Given these precedence, EEPC India recommends that the Government of India works out similar exemptions under the ongoing BTA negotiations with the US.

• India’s case for section 232 relief

  India’s share in the US market is 1.5%, 5.4% and 2.9% for steel, steel products and aluminium respectively. The total exports are only approximately around USD 5 Billion and most of the exporters operating in these sectors are MSMEs. The industry is of the view that given the not so significant export value and the interest of the MSMEs, the Government of India should seek for exemptions from Section 232 in the ongoing BTA negotiations.

• High steel prices in India

  The increase in duty under Section 232 is expected to raise US domestic prices. Consequently, the US buyer may pass on some of the additional costs to the customer. Currently, the buyer is requesting Indian exporters to absorb at least half of the remaining additional costs. However, due to high steel prices in India, exporters are finding it difficult to offer such discounts to their US buyers.

• High power cost in Aluminium production

  The aluminium industry also faces similar challenges. In case of aluminium, power remains the most significant factor contributing to 40% of the cost of production. In India, the source is generally thermal power which is expensive when compared to renewable energy and gas. In this scenario, competitors in Europe where the main source of power is renewable energy can easily offer discount and expand their market in the US. Similar opportunities will also be created for Canada which is already the top supplier to the US market. Industry is also apprehensive about the rise of Middle East where countries like UAE and Bahrin are also gearing up aluminium production. They are using natural gas as energy source which is also cheaper than thermal power. Therefore, the industry thinks that the impact of the newly increased Section 232 tariffs would be significantly detrimental for the aluminium exports.

• Growing policy uncertainty

  Given the frequent changes in policy stance in the US, the buyers are concerned about the uncertainty. The situation has been exacerbated by the fact that many countries along with India have appealed against the Section 232 tariffs and the reciprocal tariffs in the WTO. In this situation, many US buyers are holding back their purchase decisions.

  On the other hand, some of our members have mentioned that they have production units in the US. If the Section 232 tariffs are imposed, they will expand their production facilities in the US to protect themselves from the tariffs. However, if the tariffs are not imposed many of them will continue to export given the low cost of production in India. Therefore, there is significant uncertainty for them as well.

• Section 232 as a non-tariff barrier

  Exporting under Section 232 entails a rigorous documentation process, including detailed disclosures on the composition of metals and the origin of melt-and-pour operations. The introduction of content-based duties has further complicated compliance requirements. These procedural complexities function as non-tariff barriers, affecting exporters—particularlyMicro, Small, and Medium Enterprises (MSMEs)—by increasing administrative burdens.

CONCLUSION…

The United States has officially increased Section 232 tariffs on steel and aluminium imports from 25% to 50%, effective June 4, 2025. This move poses a serious challenge for Indian exporters, particularly small and medium enterprises (SMEs) that rely heavily on metal-based exports to the U.S. market.

While the United Kingdom successfully negotiated exemptions under its Free Trade Agreement (FTA) with the U.S., India is still in the process of negotiating a Bilateral Trade Agreement (BTA). EEPC India has urged the government to secure similar relief, emphasizing the need to protect the competitiveness of Indian manufacturers and safeguard employment in the sector.

With the new content-based duty structure adding compliance burdens and cost pressures, the outcome of the ongoing India-U.S. trade talks will be critical. The Indian industry remains hopeful that these negotiations will lead to tariff relief or exemptions, enabling exporters to maintain their foothold in the U.S. market and continue contributing to India’s industrial and economic growth.