Trump's 50% steel tariff to have limited direct impact but China dumping a worry: Analysts

Not much is expected in terms of direct impact on Indian steelmakers due to Trump's move to jack up blanket tariffs to 50%

US President Donald Trump's move to raise tariffs on steel to 50 percent will likely have a limited direct impact on Indian steelmakers but dumping by China and other countries can’t be ruled out, analysts have said.

Any impact on exports of iron and steel-based products, especially automobiles, auto components, and engineering products, will have to be monitored, they added.

"No material impact is seen on Indian steelmakers (due to the 50 percent tariffs). Any indirect impact based on the tariffs for steel products like equipment, automobiles, or auto parts, needs to be seen, as trade talks continue between India and the United States," an analyst with a large domestic brokerage said on condition of anonymity.

Even as India has imposed a safeguard duty on imports of some grades of steel, the continuation of it beyond the mandated 200 days may be fraught with risks, observers said. The safeguard duty, which came into effect on April 21, is at 12 percent.

India’s steel exports to the United States are limited, even as products made from iron and steel such as auto and other engineering components, have a larger market there.

In FY24, India shipped 95,000 tonne of finished steel, worth around Rs 1,924 crore, to the US, data published by the government said.

In the previous fiscal, India exported 165,000 tonne of steel to the US. The peak over the past five years was in FY22, at 214,000 tonne, valued at Rs 2,621 crore, the data showed.

Despite the safeguard duty, finished steel from China, Vietnam, and other sources remains closely competitive, even as the duty, and related sentiment, have managed to slow imports down, data from BigMint shows.

As demand in China remains subdued due to sluggish consumption and a crisis in the real estate sector, Chinese steelmakers continue to push exports. Production cuts also seem unlikely in the immediate future but a reckoning may be on the horizon, if and when the tariff issues settle down, observers said.

It needs to be seen what Chinese steel producers do, whether they cut down production or continue with the exports, Vikash Halan, managing director of corporate finance at Moody's Ratings, said. “It is hard to do a steel production cut in a short order, and it is an expensive decision to make, but you can't be losing money for a long period of time,” he said.

The trick with the US is it is not certain how long the 50 percent tariff will remain. Nobody can decide on tariffs just yet. “The play right now is to wait and watch, rather than book losses,” he said. Once the tariff issues settle down, there will be a rethinking of capacity in China because its own demand is much less and they don't need a billion tonne of steel every year, Halan added.

Trump late on June 3 signed an executive order that brought into effect from June 4 the hike in tariffs on imported steel and aluminium to 50 percent, up from the 25 percent rate introduced in March.