Will India's Three-Year Steel Tariff Protect Local Industries from Cheap Imports?

The Indian government has introduced a three-year import tariff of 11% to 12% on various steel products to protect its domestic industry from cheap imports, particularly from China. This safeguard duty aims to reduce the influx of low-cost steel that threatens local manufacturers, with specific exclusions for certain developing nations and specialty steel products.

Last updated: 30 October 2023 (BST)

What’s happening now

India's finance ministry has officially enforced a safeguard duty on specific steel imports, aimed at curbing the surging volumes of cheap steel from countries like China, Vietnam, and Nepal. Effective immediately, the duty is structured to escalate gradually, starting at 12% in the first year, then 11.5% in the second year, and finally settling at 11% in the third year. This measure follows a temporary tariff imposed in April 2023, which highlighted the government's ongoing concern regarding the impact of low-cost imports on the domestic steel sector.

Key takeaways

India has imposed a three-year tariff on certain steel imports, starting at 12%.
The duty's intention is to protect local manufacturers from the adverse effects of cheap imports.
Exemptions apply to some developing countries and specialty steel products.

Timeline: how we got here

The recent tariff is a continuation of India's efforts to protect its steel industry. Key dates in this timeline include:

April 2023: A temporary 200-day tariff of 12% was implemented on steel imports.
October 2023: The three-year safeguard duty was officially published in the government gazette.

What’s new vs what’s known

New today/this week

The new safeguard duty constitutes a structured tariff aimed at addressing the specific threat posed by increased imports, as highlighted by the Directorate General of Trade Remedies. This initiative reflects a strategic approach to bolster domestic manufacturing capabilities.

What was already established

Prior to this announcement, the Indian steel ministry had expressed concerns regarding the potential injury to local steel producers due to the influx of inferior quality steel imports. The temporary tariff instituted in April served as an initial measure to mitigate these risks.

Impact for the UK

Consumers and households

While this policy primarily targets imports into India, UK consumers could feel indirect effects. As India imposes these tariffs, the global steel market may adjust, potentially impacting prices and availability in the UK. Any shift in supply chains could also affect costs for construction and manufacturing industries.

Businesses and jobs

UK businesses that rely on steel imports might experience changes in pricing structures or availability of certain steel products. The imposition of tariffs could lead to increased costs for manufacturers using imported steel, which may, in turn, impact hiring and operational costs.

Policy and regulation

The UK government will be observing these developments, especially in light of its own trade negotiations and regulatory frameworks concerning imports. The situation could influence discussions on tariffs and trade agreements moving forward.

Numbers that matter

12%: The initial tariff rate imposed on non-exempt steel imports.
200 days: Duration of the temporary tariff implemented in April.
11.5%: The tariff rate for the second year of the safeguard duty.
11%: The final tariff rate for the third year of the safeguard duty.

Definitions and jargon buster

Safeguard duty: A tariff imposed to protect a specific industry from an unexpected surge in imports.
Steel ministry: The government body responsible for policies concerning steel production and imports.
Anti-dumping levies: Tariffs imposed to protect domestic industries from foreign companies selling products at an unfairly low price.

How to think about the next steps

Near term (0–4 weeks)

UK businesses should monitor any changes in steel pricing and supply chains as the new tariff takes effect in India. Networking with suppliers to anticipate possible changes in costs is advisable.

Medium term (1–6 months)

As the tariffs settle into place, organisations should evaluate their steel sourcing strategies to ensure they remain competitive. This might require seeking alternative suppliers or renegotiating contracts.

Signals to watch

Changes in steel prices in global markets, including the UK.
Reports on the impact of the tariffs on Indian steel production and export levels.
Government statements regarding future trade agreements and tariffs affecting steel imports.

Practical guidance

Do

Stay informed about global steel market trends and pricing.
Engage with suppliers regularly to assess changes in availability and costs.
Consider diversifying your supply chain to mitigate risks associated with tariffs.

Don’t

Neglect the potential impact of tariffs on your pricing strategies.
Overlook the importance of quality when sourcing steel materials.
Ignore the regulatory environment as it evolves in response to international trade issues.

Checklist

Review your current steel suppliers and their pricing structures.
Assess the quality of steel products in relation to market standards.
Develop contingency plans for potential supply chain disruptions.
Monitor updates from industry bodies regarding trade regulations.
Keep track of competitor responses to changing steel prices.

Risks, caveats, and uncertainties

The landscape surrounding steel tariffs is dynamic, with potential for further changes based on international trade relations. There is uncertainty regarding how other countries may respond to India's tariffs, which could lead to retaliatory measures or adjustments in trade policies. Businesses should remain vigilant regarding both domestic and international developments that could affect steel availability and pricing.

Bottom line

The introduction of a three-year import tariff on steel by India marks a significant step in protecting its local industry from cheap imports. While the immediate effects will be felt primarily in India, UK consumers and businesses should prepare for potential shifts in the global steel market that could impact pricing and availability.

FAQs

What is the purpose of the new import tariff on steel in India?

The purpose of the new import tariff is to protect the Indian steel industry from cheap imports, especially from countries like China, by imposing a safeguard duty over three years.

Who is affected by this tariff?

The tariff affects steel imports from countries such as China, Vietnam, and Nepal, but it exempts certain developing nations and specialty steel products.

How does this tariff impact UK businesses?

The tariff may lead to changes in global steel prices, affecting UK businesses that rely on steel imports, potentially increasing costs and impacting supply chains.