Trump's Tariff War: Big steel companies bat for protectionism while smaller players want no import tariffs

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On March 12,  US President’s Donald Trump's 25 percent tariff on all steel and aluminium imports into America came into effect. In India, steelmakers are still divided over a safeguard duty proposal.

The Indian government is caught in a crossfire between small and medium-sized steelmakers and larger players over this proposal to impose a safeguard duty on steel imports, which was tabled by the steel ministry with the commerce department in December 2024.

Deciding on a safeguard duty on inbound shipments of steel is critical at a time when Trump’s steeper tariffs may spur its dumping in Indian market by countries like China.

While smaller steelmakers are advocating for no tariffs or a cap of up to 15 percent, at best, larger players remain firm on their proposal of a steeper 25 percent tariff, according to industry sources. Smaller players fear that a higher duty will raise input costs.

What does the industry want?

The Indian Steel Association (ISA), which represents leading steelmakers, such as Tata Steel and JSW Steel, has been lobbying the government for a safeguard duty on steel since December, anticipating that higher tariffs from the US could lead to a surge in imports into India. However, negotiations remain at an impasse.

"The government is ready. Earlier, they proposed a 15 percent tariff, but big steelmakers are insisting on a bare minimum of 25 percent to protect the domestic industry from dumping. With the US imposing tariffs, China will now indirectly dump steel into India through Korea or Vietnam. This is the right time to accelerate the tariff," said one of the industry sources.

A second industry source said that the government is toying with the idea of a levy between 10-15 percent as smaller players highlight that a higher safeguard duty could increase production costs, especially for the MSMEs (Micro, Small and Medium Enterprises) in the manufacturing sector that depend on steel.

However, a section of the stakeholders is adamant that the safeguard duty on steel imports should not be lower than 25 percent.

"Every country is protecting its interests; it's just a matter of an additional 10 percent hike over the 15 percent that the government is more inclined to levy,” the first industry source said.

The ISA has represented this issue multiple times before the Indian government since December 2024, anticipating steeper duties from America on steel, specifically targeting China.

Steel companies find the going tough

The call for protective measures come at a time when major steel companies are scaling back on capital expenditure and revising their guidance downward, with declining prices weighing on profitability.

In a recent media interview, Tata Steel MD TV Narendran highlighted that the prolonged downturn in metal prices is making it difficult for India’s largest steelmaker to plan future investments effectively.

India’s steel capacity, production, and consumption saw a significant growth between FY20 and FY24. However, this momentum hit a major hurdle in FY24 when India turned into a net importer of steel after nearly a decade of being a net exporter. The widening gap between domestic and international steel prices made Indian steel exports uncompetitive, while the influx of cheap imports surged.

The challenges are particularly severe in the flat steel segment, where Indian steelmakers have lost a 14 percent market share to China. Traditionally, flat steel commanded higher prices than long steel, but the flood of low-cost Chinese imports has reversed this trend.

Leading Indian steelmakers, including JSW Steel and Tata Steel, dedicate a majority of their capacity to flat steel production, making them the hardest hit by the surge in imports. Despite a respectable year-on-year (YoY) growth of 8-12 percent in sales volumes, their revenues and profitability took a hit in the October-December quarter.

"In FY26, the profitability of steel players is likely to remain range-bound due to subdued realisations amid the threat of low-cost imports, though it will be supported by stable raw material prices," rating agency India Ratings and Research stated on March 11. "However, if safeguard duties are implemented, they could provide a tailwind to prices."