Trump’s Tariff Bomb: US-India Trade War Reignites
Newly elected US President Donald Trump has once again ignited the flames of a trade war by announcing a steep increase in tariffs on steel and aluminium imports from India — from 25% to 50%. This decision, effective from 4 June 2025, comes as a major economic blow to Indian exporters, especially at a time when the global steel and aluminium sectors are already grappling with recession and overcapacity.
This trade war is poised to not only strain India-US trade relations but also disrupt global supply chains, impact employment, and carry serious diplomatic consequences. In this article, we’ll examine every aspect of Trump’s decision — what this trade war entails, how it affects India, India’s potential countermeasures, expert opinions, and how India can possibly turn this trade crisis into a strategic advantage.
1. Trump’s Tariff Decision: A Spark for Trade War
Under his ‘America First’ agenda, Donald Trump has decided to raise tariffs on steel and aluminium imports from India to 50%, starting from 4 June 2025. Trump has linked this move to “national security,” claiming that cheap foreign steel and aluminium are harming American industries.
However, experts view this as the beginning of a new trade war. This policy aligns with Trump’s long-standing protectionist stance aimed at boosting domestic industries by curbing foreign imports. Some analysts also see this as a continuation of his 2024 election promises to voters in steel-heavy states like Pennsylvania and Ohio.
The trade war is not confined to India. Other major steel producers like the European Union, China, and Brazil are also on Trump’s radar. However, India — which exports billions of dollars’ worth of steel and aluminium to the US — is likely to be the worst affected.
2. Impact on India: A Major Economic Blow
Trade relations between India and the US have significantly strengthened in recent years. In FY 2024–25, bilateral trade between the two nations reached $131.84 billion, with the US accounting for 18% of India’s total exports. Steel and aluminium form a crucial part of this trade.
According to FY 2024–25 data, India’s exports to the US included:
- Iron and Steel: $587.5 million
- Steel Products: $3.1 billion
- Aluminium and Related Goods: $860 million
In total, India’s steel and aluminium exports to the US amounted to $4.56 billion. With the new 50% tariff, these products will become significantly more expensive in the American market, leading to a drop in demand. The direct impact of this trade war will be felt in terms of reduced revenues, lower production, and job losses among Indian exporters.
Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), states, “This trade war is a significant economic setback for India. Exports will shrink, profits will fall, and India’s global competitiveness could weaken.”
3. Impact on the US: A Self-Inflicted Crisis
Trump’s tariff move is not just damaging for exporting countries like India but could also backfire on the US economy. Steel prices in the US are already significantly higher than global averages. As of March 2025:
- USA: $984 per metric ton
- Europe: $690 per metric ton
- China: $392 per metric ton
After the 50% tariff, US steel prices could surge to $1,180 per ton, escalating costs for automobiles, machinery, construction, and infrastructure development. This would ultimately hit American consumers through rising inflation. According to Moody’s Analytics, this trade war could lead to a 0.6% contraction in the US economy and the loss of 250,000 jobs.
Moreover, US companies dependent on cheap imported steel may lose their global competitiveness, reducing demand for American goods — thus making the trade war counterproductive for the US itself.
4. How Trump Gained Authority to Raise Tariffs
On 28 May 2025, the US International Trade Court declared some tariffs under the IEEPA (International Emergency Economic Powers Act) as illegal. However, Trump gained legal clearance under Section 232 of the 1962 Trade Expansion Act to increase tariffs on grounds of national security.
Using this provision, Trump has justified doubling tariffs on countries like India, fuelling a renewed trade war. This clause allows him to treat foreign imports as national security threats and impose necessary trade barriers. Experts believe Trump is leveraging this legal tool to pressure foreign nations and assert a new phase of protectionism.
5. India’s Counter Strategy: A Tough Stand in the Trade War
India is unlikely to stay silent in this trade war. The government has already begun preparations to file a complaint against the US at the World Trade Organization (WTO) and is considering retaliatory tariffs. India contends that the US tariffs violate WTO rules as they lack substantial justification.
Previously, in 2018, when Trump imposed a 25% tariff on steel and 10% on aluminium, India responded with counter tariffs on 29 US products including almonds, apples, and Harley-Davidson motorcycles. This time, India has proposed imposing retaliatory tariffs on American apples, almonds, boric acid, and iron-steel items.
Ongoing negotiations over a Bilateral Trade Agreement (BTA) between India and the US could also play a crucial role in resolving this trade war. Both countries aim to expand trade to $500 billion by 2030. If successful, such a deal might offer India some relief.
6. Expert Opinions: Economic and Environmental Fallout
GTRI’s Ajay Srivastava warns, “This trade war is both an economic and strategic challenge for India. Declining exports could erode India’s global competitiveness.”
Experts also point to the environmental toll of such protectionist measures. The disruption in global supply chains could increase production and transport costs, leading to a rise in carbon emissions — a setback for global climate goals.
Nonetheless, some experts see opportunity amidst the crisis. Prominent investor Ruchir Sharma suggests, “Trump’s trade war policy could benefit emerging markets like India. With its vast domestic market and diversified economy, India has the potential to turn this crisis into an opportunity.”
7. India’s Way Forward: Turning the Trade War into an Opportunity
To effectively deal with this trade war, India can pursue multiple strategies:
a) Legal Action via WTO
India can formally challenge the US tariffs at the WTO — a move it has used successfully in the past.
b) Retaliatory Tariffs
By imposing counter tariffs on American goods, India can apply economic pressure, forcing the US to reconsider its policies.
c) Exploring New Export Markets
India should develop strategies to increase its steel and aluminium exports to alternative markets like Europe, the Middle East, and Southeast Asia — thereby reducing reliance on the US.
d) Supporting Domestic Industries
The Indian government can provide subsidies, tax breaks, or relief packages to strengthen the competitiveness of domestic steel and aluminium sectors.
e) Boosting ‘Make in India’
With Trump even threatening tariffs on Indian-assembled products like iPhones, India should double down on its ‘Make in India’ campaign and attract global investments for local manufacturing.
8. Trade War: More Than Tariffs, an Economic Battle
Trump’s tariff announcement is not just a policy tweak — it marks the onset of a full-fledged trade war. Rising trade tensions between India and the US will impact not just their economies but also diplomatic relations and the broader balance of global commerce. India must respond with strategic foresight and resilience.
In this crisis lies India’s greatest opportunity — to reinforce its economic self-reliance. By leveraging its domestic market strength, seeking new export avenues, and deploying smart countermeasures, India can not only weather this trade war but emerge stronger.
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