Will India's Retaliatory Tariffs on US Goods Derail Trade Talks?
India's Trade Response to US Tariffs
New Delhi: India's intention to impose retaliatory tariffs on specific American imports, in response to US tariffs on steel and aluminum, may complicate ongoing trade negotiations between the two nations, according to the Global Trade Research Initiative (GTRI).
The GTRI indicated that if the US engages in discussions with India regarding these tariffs or decides to withdraw them, a resolution could be achieved.
However, if no agreement is reached, India's retaliatory duties could be implemented as early as June, potentially affecting US exporters and escalating trade tensions.
In a notable action against US safeguard duties on steel, aluminum, and related products, India has officially informed the World Trade Organization (WTO) of its plan to suspend trade concessions granted to the US.
This suspension may involve raising tariffs on selected American goods. Although India has not yet specified which products will be affected, it previously imposed retaliatory tariffs on 28 US items in 2019, including almonds, apples, and various chemicals.
The notification issued on May 12 signifies India's use of its rights under the WTO Agreement on Safeguards (AoS).
This provision permits a country to retaliate when another member imposes safeguard measures without adequate notification or consultation. India had requested consultations with the US in April, but Washington maintained that the tariffs were imposed for national security reasons and should not be classified as safeguard measures.
Ajay Srivastava, founder of GTRI, noted that India's recent action at the WTO occurs at a critical juncture, as New Delhi and Washington are considering a broader free trade agreement. This retaliation could hinder ongoing negotiations.
He emphasized that the outcome now hinges on how the US responds. If the US engages in talks or retracts the disputed measures, a resolution may be possible. Otherwise, India's tariff response could be implemented in early June.
India's potential countermeasures may involve increasing tariffs on a range of US imports to match the damage caused to Indian exports.
According to the WTO notification, US safeguard duties affect approximately $7.6 billion worth of Indian exports, leading to an estimated $1.91 billion in additional duties collected by the US.
India aims to recover this amount through retaliatory tariffs on selected American products.
The GTRI further explained that the core issue revolves around the ongoing US safeguard tariffs on steel, aluminum, and related imports, which were initially imposed in 2018 for national security reasons and have been renewed multiple times since.
The most recent extension was enacted through US Presidential Proclamations dated February 10, 2025, with an effective date of March 12 this year.
India contends that these actions, although not officially notified by the US as safeguard measures, function as such and violate WTO regulations under the General Agreement on Tariffs and Trade (GATT) 1994 and the Safeguards Agreement.
Srivastava pointed out that the US failed to conduct mandatory consultations under Article 12.3 of the AoS, prompting India to assert its right to retaliate.
This is not India's first encounter with safeguard retaliation. In June 2019, India raised tariffs on 28 US products after the US removed India from its Generalized System of Preferences (GSP) and continued its steel and aluminum tariffs.
That action, which involved about $240 million in trade value, marked India's initial use of WTO-sanctioned retaliation.
These duties were lifted in September 2023, following Prime Minister Narendra Modi's visit to Washington, where both nations agreed to resolve six ongoing WTO disputes, including this one.
Currently, both countries are in discussions for a bilateral trade agreement (BTA), with the Indian delegation visiting the US this week for trade negotiations.