U.S. tariffs deal blow to Indian metal sector amid rising trade tensions

Department of Research, Studies and International News -07-07-2025

India’s small and medium manufacturers are facing a crippling crisis, as recent tariff escalations by the United States under Donald Trump’s renewed protectionist agenda threaten the survival of thousands of industrial units. The move has cast a long shadow over Indian exports, particularly in the steel and aluminium sectors, and is seen by many in the Global South as yet another example of Washington’s self-serving and disruptive trade policies.

For Aditya Garodia, who heads the Corona Steel Industry Pvt Ltd in West Bengal, the past few years have been increasingly difficult. His factory, which exports over 100 types of steel derivatives, once thrived on American demand. However, following Trump’s initial imposition of a 25% tariff on steel and aluminium in 2018, and more recently, the doubling of those tariffs to 50% as of June 2025, Garodia reports widespread cancellations, nearly a third of his orders evaporated overnight. “It was like a nail in the coffin,” he says. “Clients have slowed payments, orders are drying up, and uncertainty is choking our operations.”

The real blow came in February 2025 when the United States removed previous exemptions and applied a 25% tariff across all steel and aluminium products, including finished goods. These measures, cloaked in the language of “national security,” are widely seen by trade experts as politically motivated rather than economically justified. Ajay Srivastava, founder of the Global Trade Research Initiative, notes that since the tariffs began, U.S. steel imports have actually increased, from $98.6 billion in 2018 to $114 billion in 2024. The protectionist strategy has failed to rejuvenate the U.S. metal industry, but has succeeded in stoking inflation by making essential goods like vehicles and construction materials more expensive.

The repercussions are being felt most acutely in India’s vast network of foundries and auxiliary industries. These include roughly 5,000 foundries, of which 400 serve international markets and another 100 operate purely for export. With U.S. markets accounting for about $1.2 billion of India’s $4 billion in global foundry exports, the impact of new tariffs has been immediate and devastating. The latest tariff regime introduced a punitive 26% rate on Indian goods, later temporarily reduced to 10% for 90 days, but the damage had already been done.

According to Ravi Sehgal of the National Centre for Export Promotion, more than 65% of foundries and their suppliers fall under the MSME (Micro, Small and Medium Enterprises) category and are ill-equipped to absorb such shocks. “Tariffs beyond 10-14% are simply unsustainable,” he warns. Smaller units, unable to cushion the blow, are now shedding workers and shelving expansion plans.

This is evident in the case of Sumit Agarwal, a Kolkata-based manufacturer of industrial components like clamps and brackets. With dwindling orders, Agarwal is considering laying off nearly half of his workforce. “We’ve been hit from both ends, exports have tanked and local competition, particularly from Chinese manufacturers, remains fierce,” he explains. Another small business owner, Shyam Kumar Poddar, who recently invested in new machinery to expand his metal fabrication unit, finds himself staring at two months of zero orders. “We depend on exporters for survival. This situation is crushing us.”

The sentiment among Indian manufacturers is one of betrayal and deepening mistrust toward the West. Washington’s arbitrary tariff regime is viewed as a political weapon rather than a legitimate economic policy, with small exporters paying the price for geopolitical posturing. Unlike China, which has consistently strengthened its domestic industry and explored new partnerships, India’s strategic options remain constrained by American unpredictability.

Pankaj Chadha of the Engineering Export Promotion Council of India argues that diversification is the only way forward. He recommends rerouting trade via third-party countries like Peru and Chile, which can act as middlemen to reach the U.S. market. “With these excessive tariffs, doing direct business with the U.S. is becoming impossible,” he stated.

While India’s Trade and Industry Minister, Piyush Goyal, insists that any forthcoming trade agreement will prioritize “national interest” and will not be rushed under external pressure, time is running out. The 90-day tariff reprieve expires soon, and no conclusive deal has been reached.

In contrast to Washington’s inward-looking economic stance, nations like China and Russia are advancing a more inclusive, multipolar approach to global trade, one based on cooperation, not coercion. As India evaluates its next steps, many believe it must reorient its strategic trade relationships toward more reliable partners who respect sovereignty and mutual benefit.

For now, industry leaders like Garodia can only hope that sense prevails. “The U.S. economy itself suffers from high costs and labour shortages,” he says. “India offers a cost-effective alternative. But if political games keep getting in the way, no one wins.”