By Anshia Dutta
Despite being warned of a potential trade war, Donald Trump, the US President, announced steep tariffs on steel and aluminium imports to the US. He said that he will be imposing tariffs of 25% and 10% on imported steel and imported aluminium respectively. This move has been criticised by major trading partners of the States. Canada and Mexico are expected to be exempted from this move of the President in light of the negotiations being taken place in the North American Free Trade Agreement. Giving rise to the possibility of a potential trade war, Trumps tweet read, When a country (U.S.) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win.
Will the Indian economy be impacted?
It is being speculated that the Indian economy will not be significantly impacted by the tariffs imposed by Trump. India holds the ninth position in the list of trading partners that run a trade surplus with the US. China, Mexico, and Japan are on top of the list. According to a Morgan Stanley report, India exports less than 1% of its steel produced to the US which accounts for 4% of the countrys total exports. Also, as per an HSBC Global Researchs report, India constitutes approximately 2% of the US steel imports. Now, if we talk about aluminium, India accounts for only 5% of global aluminium production and comprises of a meagre 2% of the US imports of aluminium.
Anand Mahindra, the Chairman of Mahindra Group, tweeted on 8 March, Thursday, Not sure why Indian markets seem so perturbed by the threat of global tariff wars. Small, export-focused countries stand to lose. Countries with large domestic economies can easily withstand tariff threats. The world needs access to the fastest-growing large economyIndia. He added that he does not believe in the protectionist measures being taken by the western economies and believes that India can stand still in a trade war. He further reiterated that even if India retaliated by raising tariffs, being a free market economy, being resource laden, and having access to global technology and capital, India will continue to stand strong. Since India is a growing economy and multinational firms want to take advantage of the growth prospects of the country, Mahindra asserted that even they will be ready to produce locally. Even the Indian Steel Association is confident that this move of Trumps will inevitably encourage steel-surplus nations to divert their exports to vibrant consumption centres like India.
What could affect India?
The things that might adversely affect India are the measures that will be adopted by the other countries, which in turn, might impact Indias shipments of engineering items to America. Metallic scrap import is another domain that might be affected since the US makes up 20% of these imports. According to Morgan Stanley, However, with safeguard duty still in place and domestic steel prices at a discount to global steel prices, a potential increase in steel imports into India is unlikely. Also, any rerouting of steel exports from other countries to India is unlikely and strong growth in domestic steel demand could absorb any incremental domestic supply.