A Shield for Steel? India’s New Tariffs Ignite Industry Debate
In a move aimed at curbing rising imports and protecting its domestic steel industry, India has recommended a temporary 12% safeguard duty on certain steel products for 200 days. This decision, prompted by concerns over an influx of cheaper steel from countries like China, South Korea, and Japan, has ignited a fierce debate between proponents of protectionism and advocates for free competition.
India recommends 12% safeguard duty on flat steel imports for 200 days – a game changer for the domestic market.
— BigMint (formerly SteelMint/CoalMint) (@BigMint_Co) March 19, 2025
▪️Provisional duty slapped on alloy, non-alloy steel imports for 200 days
▪️Move aims to counteract trade diversions following tariffs by US, other countries… pic.twitter.com/CQuZgfnszU
The Government’s Rationale: Safeguarding Domestic Industry
1. Surge in Steel Imports:
The Directorate General of Trade Remedies (DGTR), under the Ministry of Commerce and Industry, cited a significant surge in steel imports as the primary reason for recommending the safeguard duty. India, despite being the world’s second-largest crude steel producer, has seen record quantities of finished steel being imported, particularly from China, South Korea, and Japan.
2. “Serious Injury” to Domestic Industry:
The DGTR report emphasized that the influx of cheap steel is causing “serious injury” to the Indian steel industry. Smaller mills have been forced to scale down operations and consider job cuts, prompting the need for immediate protective measures.
3. Trade Diversion:
The report also pointed to trade diversion caused by the United States’ imposition of tariffs on steel and aluminum in 2018. As other countries, including the EU, South Africa, Turkey, Vietnam, and Malaysia, raised barriers against steel imports, India has become a target for diverted trade flows.
The Industry’s Response: A Divided Front
1. Support from Major Steel Producers:
Large steel manufacturers, such as JSW Steel, SAIL, ArcelorMittal, and Jindal Steel, have welcomed the safeguard duty. Tata Steel CEO & MD, T V Narendran, expressed support for the move, stating: “We welcome the decision and appreciate the government’s support.”
2. Concerns from User Industries and MSMEs:
However, user industries and micro, small, and medium enterprises (MSMEs) have voiced concerns about potential price hikes and supply disruptions. Pankaj Chadha, chairman of engineering exporter body EEPC India, called for additional safeguards for MSMEs and user industries, suggesting a provision allowing MSMEs to procure steel at export parity prices.
Critics’ Concerns: Monopolistic Practices and Trade Liberalization
1. Monopolistic Practices:
A report by the Delhi-based think tank Global Trade Research Initiative (GTRI) raised concerns that the safeguard measure could encourage monopolistic practices, as domestic suppliers might restrict consumer choices and inflate prices.
2. Inconsistency with Trade Liberalization:
The GTRI report also pointed out that 70-80% of India’s steel imports stem from free trade agreements (FTAs) with Japan and South Korea, making the safeguard duty inconsistent with India’s trade liberalization policies.
3. Inappropriate Base Year:
The investigation used an inappropriate base year (Covid-affected period) to compare import levels, misrepresenting normal post-pandemic recovery as a sudden surge. The steel industry itself faces rising input costs, not necessarily losses due to increased imports.
The Global Context: A Growing Trend of Protectionism
India’s decision to impose a safeguard duty on steel products is part of a growing trend of protectionism around the world. As countries grapple with economic challenges and trade imbalances, they are increasingly resorting to tariffs and other trade barriers to protect their domestic industries.
1. US Tariffs on Steel and Aluminum:
The United States’ imposition of tariffs on steel and aluminum in 2018 has triggered a wave of retaliatory measures and trade disputes, contributing to increased uncertainty in the global trading system.
2. EU and Other Countries’ Safeguard Duties:
The European Union and other countries, including South Africa, Turkey, Vietnam, and Malaysia, have also imposed safeguard duties on steel imports to counter trade diversion from the US and protect their domestic industries.
Balancing Protectionism and Competition in India’s Steel Industry
India’s decision to impose a safeguard duty on steel products reflects the ongoing tension between protectionism and competition in the global economy. While the move aims to protect the domestic steel industry from unfair competition and trade diversion, it also raises concerns about potential price hikes, reduced consumer choices, and inconsistency with trade liberalization policies. As India navigates this complex terrain, it will be crucial to strike a balance between supporting its domestic industries and promoting a competitive and open trading system.
FAQ
What is a safeguard duty?
A safeguard duty is a temporary tariff imposed to shield a domestic industry from a sudden surge in imports.
Why has India recommended a safeguard duty on steel products?
To curb rising imports and protect the domestic steel industry from “serious injury.”
Which steel products are affected by the safeguard duty?
Certain steel products are affected.
What is the proposed rate of the safeguard duty?
The proposed rate is 12%.
For how long will the safeguard duty be in effect?
For 200 days.
Who supports the safeguard duty?
Major steel producers, such as JSW Steel, SAIL, ArcelorMittal, and Jindal Steel, support the safeguard duty.
Who opposes the safeguard duty?
User industries and micro, small, and medium enterprises (MSMEs) are concerned about potential price hikes and supply disruptions.
