India's Small Exporters Fight Back Against US Tariffs: A Call for Trade Relief
The escalating trade tensions between the United States and India have led to a significant concern for India’s small engineering goods exporters. The impending 25% tariffs on steel and aluminium, scheduled to take effect on March 12, 2025, are expected to exacerbate the challenges faced by Indian exporters, particularly those in the engineering and manufacturing sectors. With a global engineering export market valued at approximately $20 billion annually, nearly $7.5 billion worth of shipments from India could be directly impacted by these tariffs.
The Engineering Export Promotion Council, which represents over 10,000 small exporters, has already raised alarm bells about the adverse effects the new tariffs could have on the sector. Pankaj Chadha, the Chairman of EEPC, emphasized the critical need for India to engage in negotiations with the U.S. government to secure a bilateral trade deal. As part of these talks, India is proposing tariff cuts on certain U.S. imports, particularly those that see low inbound shipments.
This move is aimed at improving India’s position in the trade negotiations and alleviating the potential economic burden the tariffs could place on its engineering export sector.
Impact of the 25% US Tariff on Steel and Aluminium
The U.S. tariffs on steel and aluminium imports are a direct consequence of President Donald Trump's administration's ongoing efforts to protect American steel industries and reduce what it perceives as unfair trade practices from countries with lower tariff rates. The tariffs have already drawn sharp reactions from various countries, with India among the most vocal critics.
For India’s small engineering exporters, these tariffs represent a serious obstacle to maintaining profitability. The tariffs will raise the cost of U.S. imports, which in turn could increase the cost of production for Indian exporters that rely on these materials, ultimately reducing their competitiveness in the global market. With some of these exporters already operating on tight margins, the tariffs are feared to further erode their ability to make profitable deals.
Engineering Goods Sector in India Faces Increased Pressures
India’s engineering goods sector is a key pillar of its manufacturing and export economy, accounting for a significant share of the country's total merchandise exports. In January 2025, India’s exports of engineering goods to the U.S. saw a 18% year-on-year growth, reaching $1.62 billion. This outpaced the 7.44% growth of the broader engineering sector and highlighted the robust performance of India’s engineering industry despite the looming threat of tariffs.
However, the rising export tariffs and the planned safeguard duty on steel imports are likely to put a significant strain on future growth. The safeguard duty, which could go up to 14%, is aimed at protecting local steel manufacturers from the influx of cheaper Chinese imports, but it could raise domestic steel prices, thereby increasing production costs for exporters.
In light of this, exporters are requesting the Indian government to reduce tariffs on selected U.S. goods, such as steel scrap, nuts, castings, and forgings, which are crucial to their production process. By reducing these tariffs, India aims to gain a favorable response from the U.S., which may then agree to reciprocal tariff reductions or other trade concessions. India’s trade minister, Piyush Goyal, has been in the U.S. for ongoing trade talks, aiming to assess the impact of the tariffs and negotiate a favorable deal for Indian exporters.
Government Support and Strategic Negotiations
As India’s small exporters continue to face growing challenges, the role of government support has become more critical. Pankaj Chadha, chairman of the EEPC, stressed the importance of continued government assistance in areas such as export credit and technology to bolster competitiveness in the global market. The Indian government is expected to continue lobbying with the U.S. to not only secure favorable trade terms but also ensure that Indian businesses can maintain their competitive edge.
There are also proposals to reduce the import duty on U.S. steel scrap from 7.5% to nearly zero, which would benefit those involved in recycling and reusing scrap metal—an essential part of the steel production process. Reducing tariffs on such goods would lower the overall cost of production for India’s steel and aluminium manufacturers, providing a much-needed relief.
Rising Demand for Engineering Exports
Despite the looming tariff threats, India’s engineering exports have shown positive growth. The sector’s overall exports grew by 9% year-on-year from April 2024 to January 2025, amounting to $15.6 billion. This increase has been driven by a rise in demand for aircraft parts, automobiles, electrical machinery, medical instruments, and industrial machinery—key sectors that are heavily reliant on the U.S. market.
The 18% rise in January exports to the U.S. demonstrates the continued strong demand for Indian engineering products and highlights the resilience of the sector despite external challenges. However, exporters remain cautious, aware that the introduction of higher tariffs could dampen this growth, leading to declining orders from their key international markets.
Strategies for Mitigating Tariff Impact
To counter the impact of U.S. tariffs, Indian exporters have proposed several measures to mitigate the financial strain. These include:
1. Reducing import duties on U.S. goods: Lowering tariffs on critical imports such as steel scrap could ease production costs for Indian exporters, making their goods more competitive.
2. Expanding trade deals: India seeks to conclude a bilateral trade deal with the U.S., which would involve a reciprocal reduction in tariffs on both sides. This deal could open up new avenues for Indian goods in the U.S. market.
3. Boosting government export credit: The government could increase support for small exporters by offering financial assistance to counter the effects of tariffs and encourage further expansion into new markets.
4. Diversifying export markets: While the U.S. remains a major trading partner, Indian exporters are also looking to diversify their market base to reduce their dependence on one region. Increased exports to regions like Europe and Asia could help mitigate any negative impacts from U.S. tariffs.
Looking Ahead: The Road to Resilient Exports
The coming months will be crucial for India’s small exporters as they face the combined challenges of rising tariffs and increasing costs of production. While the U.S. tariffs represent a significant hurdle, the Indian government’s efforts to engage in trade talks and reduce import duties on critical goods offer a promising path forward. For India’s engineering export sector, the focus will be on securing favorable trade agreements and increasing global competitiveness.
Key Takeaways:
• India’s small exporters are seeking tariff reductions on U.S. imports in response to the 25% U.S. tariffs on steel and aluminium.
• The EEPC has called for reducing tariffs on U.S. steel scrap, nuts, forgings, and other products critical to the production of engineering goods.
• India’s engineering exports to the U.S. grew by 18% year-on-year in January 2025, demonstrating strong demand despite tariff concerns.
• India’s safeguard duty on steel imports could increase domestic steel prices, further squeezing the margins of exporters.
• The Indian government is negotiating a bilateral trade deal with the U.S. to address tariff issues and ensure favorable trade terms for Indian businesses.
• Continued government support in export credit and technology is essential for enhancing the competitiveness of small exporters in the global market.
• India’s engineering goods exports account for about 25% of its total merchandise exports, highlighting the sector’s importance to the economy.
