Following the United States' recent imposition of a 50% tariff on steel and aluminum imports, India now faces increasing pressure from the European Union due to tightened steel quotas. These developments pose significant challenges for Indian steel exporters and could reshape global trade dynamics.
The US tariff hike, effective from June 4, 2025, has already sparked concerns within India’s Engineering Export Promotion Council (EEPC). The EEPC estimates that approximately $5 billion in annual exports of steel, aluminum, and related products to the US are at risk. Chairman Pankaj Chadha expressed apprehension that the increased tariffs would make Indian exports more expensive, potentially leading to a decrease in shipments. While India's direct steel exports to the US are relatively modest, the tariff has disrupted global trade patterns, intensifying international competition and affecting prices.
Simultaneously, the European Commission has implemented stricter import restrictions on steel, aiming to protect the struggling European steel industry from a surge in imports. These measures involve reducing import quotas, known as safeguards, which limit the amount of steel that can be imported into the 27 EU member states without incurring tariffs. Once the quotas are exceeded, a 25% out-of-quota duty is applied. The EU's decision is driven by concerns about the state of the European steel sector and the challenges it faces due to increased competition from imported steel.
India's steel exports to the European Union have seen a significant surge, with 2.03 million metric tons shipped during the first eleven months of the financial year. This figure represents 46% of India's total steel exports during that period, highlighting the EU's importance as a major destination for Indian steel. However, the tightened quotas could restrict India's market access, impacting shipments, particularly to construction-heavy EU markets.
The Indian government believes that robust domestic steel demand will counterbalance the impact of the EU's stricter steel import quotas. India's steel consumption for 2023-24 was 136 million metric tons, while exports totaled just 7.5 million metric tons for the same period, underscoring the strong internal demand driven by a rapidly growing economy and infrastructure development. Despite this, the EU's measures are expected to have some impact, particularly on specific steel product categories.
As of early April 2025, some of the import quotas for certain steel products, such as hot-rolled coils, organic coated sheets, and metallic coated sheets allocated for countries like Taiwan, India, Vietnam, and China, had already been exceeded. India had used up a significant portion of its quotas for organic coated sheets and stainless bar and light section. This trend indicates that the EU's safeguard measures are already having a tangible effect on steel imports from various countries, including India.
In response to the EU's measures, India has proposed retaliatory duties on certain goods imported from the EU under WTO norms. India argues that the EU's restrictions are inconsistent with global trade rules and have caused significant trade losses. Consultations between India and the EU have taken place, but no agreement has been reached on maintaining equivalent concessions or trade compensation.
These concurrent challenges from the US and the EU highlight the complex trade environment facing India's steel industry. While strong domestic demand may cushion some of the impact, the industry needs to adapt to these new realities by exploring alternative export markets and focusing on value-added products to maintain its competitiveness. The outcome of ongoing trade negotiations between India and both the US and the EU will also play a crucial role in shaping the future of India's steel exports.
