While both nations, the US and India, engage in a Bilateral Trade Agreement (BTA) discussion, the latter country has shown an increased retaliatory action as opposed to the current import tariff on aluminium and steel imposed by the US. Recently, India announced to the World Trade Organisation (WTO) its intention to raise an additional USD 3.82 billion in import tariffs with significant adjustment duties on US goods. Does this signal a further trade tension between the two nations or the start of a new trade war?
Image source: shutterstock.com
The unprecedented hike in the US tariff on aluminium and steel from 25 per cent to 50 per cent on June 3, 2025, has been the stimulus for India for the additional tariff cost. With the higher duties, the Indian exports will witness an impact worth USD 7.6 billion to the US, while the US is expected to receive USD 3.82 billion as tax through these additional duties, claimed India to the WTO.
Since the time is highly crucial for both nations due to the ongoing heated discussion under the trade agreement, the initial phase is to be reckoned by September to October. Nonetheless, India's proposal to suspend concessions or any other compulsion can be considered as an increased tariff on certain US products.
India's notification to WTO highlights, "India reserves its right to suspend concessions or other obligations after the expiration of thirty days from the date of this notification"
In addition, India also apprised the WTO that it received no formal communication from the US about the measure initiated, reminding that it is particularly crucial when classified as a safeguard measure. Moreover, India pleaded that the US actions were against the obligations that were mooted under the GATT 1994 and the Agreement on Safeguards (AoS). Furthermore, India stated that the United States failed to inform the former country about the duties which were deemed to be mandatory under the regulations of AoS.
The first additional duties of 25 per cent on aluminium and steel were imposed on March 12 with the proclamation of the Trump administration. During that period, India had retaliated against the WTO about the 25 per cent additional duties on May 9, urging the imposition of additional duties which would help collect USD 1.91 billion on US imports. Fast forward to July 4, India again notified the WTO about its intention to further retaliate against the 25 per cent additional duties imposed on the auto and auto parts by the US.
In a discussion with the Council for Trade in Goods at WTO, India imposed additional 25 per cent duties from May 3 on passenger vehicles and the lightweight trucks as a retaliatory move to the United States’ duties imposed on India’s auto parts exports worth USD 2.89 billion. With these duties on auto parts imports, the US had the opportunity to earn almost USD 723.75 million. India now aims to gain a similar earning in tax with its retaliatory tariffs.
A similar situation between both the nations were witnessed back in 2018 when the US imposed the first 25 per cent additional duties on aluminium and steel which India stroke back in 2019 with additional tariffs on imports of the US goods like apples, lentils, boric acid, diagnostic reagents, almonds, chickpeas and walnuts among all the other 21 goods.
However, this got settled down when India's Prime Minister, Narendra Modi, in 2023 visited the US under Joe Biden's presidency, where both agreed to revoke any dispute between them at the WTO with negotiations benefiting both.
India's negotiators are supposed to visit Washington next week to discuss the interim trade deal as well as to continue the first. The previous talk between the two countries that took place between June 26 and July 2 discussed India's side to share their offers as well as the limitations of liberalisation to the US, which is still awaiting a conclusion to be drawn.
In the financial year 2025-2026, the trade between the US and India reached USD 186 billion as per the data revealed by the Ministry of Commerce. Among this, India exported goods worth USD 86.5 billion to the US and imported USD 45.3 billion, with the trade surplus being at USD 41 billion. In terms of service, India's export stood at USD 28.7 billion and the import stood at USD 25.5 billion, resulting in a surplus of USD 3.2 billion.
Responses
