The Hindu: Published on 14th May 2025:
Why in News?
India has formally notified the World Trade Organization (WTO) of its plan to impose retaliatory tariffs on U.S. imports worth $7.6 billion. This action comes in response to the U.S. raising tariffs to 25% on Indian steel and aluminium imports. The matter has reignited trade tensions even as both countries are in talks for a broader trade deal.
Background:
In 2018, under former President Donald Trump, the U.S. imposed 25% tariffs on steel and aluminium, citing national security.
Most countries negotiated exemptions, but India did not receive relief.
In June 2019, India retaliated by imposing tariffs on 28 U.S. products.
These tariffs were later withdrawn in September 2023, after diplomatic engagement.
In February 2025, in his second term, Trump renewed the tariffs, removing all exemptions.
India’s request for talks in April 2025 was rejected by the U.S., which claimed the tariffs were not “safeguard measures”, but national security steps.
What is India Proposing?:
India has notified WTO on May 9, 2025, of its intent to impose retaliatory tariffs.
These will be in the form of suspension of WTO trade concessions or obligations.
The move targets U.S.-origin products equivalent to $1.91 billion in duties — the value of the damage caused to Indian trade.
Retaliation could officially begin 30 days after the notification.
Legal Standpoint:
India claims the U.S. measures violate WTO rules, specifically:
GATT 1994 (General Agreement on Tariffs and Trade)
Agreement on Safeguards (AoS)
India states the U.S. did not consult under Article 12.3 of the AoS, giving India the right to retaliate.
India argues that despite the U.S. calling it a national security issue, the action functions as a safeguard measure, and should have been notified to the WTO.
Economic Impact:
U.S. exports worth $7.6 billion to India may become costlier due to Indian retaliatory tariffs.
Sectors like agriculture, machinery, and chemicals could be affected.
It may raise import costs and impact bilateral trade volumes temporarily.
It could also hurt global investor confidence in the India-U.S. trade relationship.
Diplomatic Implications:
This move strains India-U.S. trade ties, even as both nations are negotiating a comprehensive trade agreement.
Might impact strategic ties if unresolved.
However, it also shows India’s assertiveness in defending its trade interests at global forums like WTO.
Future Prospects:
India is expected to update the WTO’s Council for Trade in Goods and Committee on Safeguards.
Retaliatory duties may take effect after June 8, 2025, if no resolution is reached.
There is still room for negotiated settlement, especially considering past instances where duties were rolled back (e.g., 2023 post-PM Modi's U.S. visit).
Comparison with Past Events:
A similar retaliation was done by India in 2019, after removal from the GSP (Generalised System of Preferences).
That stand-off ended in 2023 with improved ties and removal of extra tariffs.
This current move echoes that assertive policy, but in a higher-stakes environment given the scale involved ($7.6 billion vs $240 million earlier).
Strategic Interpretation:
- The retaliation could be a negotiation tactic to push the U.S. back to the discussion table.
- It reflects India's increasing readiness to use legal instruments at multilateral platforms like WTO.
- Shows shift in India’s global trade posture from defensive to assertive.
