Trump's reciprocal tariffs: No new shocks for Indian steel, aluminium, and auto makers

Mumbai: Indian steel and automotive companies will face no additional trade barriers over and above the previously announced 25% import duties, according to a fact sheet published by the White House shortly after US President Donald Trump announced additional reciprocal tariffs of 27% on Indian goods on Wednesday.

Steel and aluminium articles, and automobiles and auto parts, on which Trump earlier announced blanket 25% tariffs, would be exempt from Wednesday’s reciprocal tariffs, the White House said.

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However, existing concerns remain. While India’s automobile exports to the US are negligible, the country is a significant destination of Indian-made auto parts. India is estimated to export about $6.8 billion in auto parts to North America, as per the Automotive Component Manufacturers Association of India (ACMA). The bulk of these shipments go to the US.

The 25% levy on auto parts that kicks in from 3 May could prove to be a dampener for Indian exporters. However, given the tariff is uniform across countries, trade is unlikely to shift from India to elsewhere immediately.

Trade relationships in the auto industry also tend to be sticky. It is not easy for an automaker to switch parts suppliers on short notice, given the complexity of their supply chains and the time it takes to validate and bring on board new suppliers.

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A larger concern for the Indian industry is that in due course, larger suppliers of auto parts such as China may shift their exports elsewhere from the US, including to India, potentially eating into the business of domestic parts suppliers.

Steel and aluminium: Small exposure, big threat

Similarly, India’s steel and aluminium imports to the US are negligible, too, but concerns over China redirecting its excess production to India has the industry worried.

“India’s direct exposure to US steel tariffs remains limited, as exports to the US form a small share of the total steel trade,” said Dhruv Goel, chief executive of BigMint, a market intelligence firm.

“However, the indirect impact could be significant. Any disruption in global trade flows can lead to price volatility, shifts in demand-supply dynamics, and increased competition in alternative markets,” Goel said.

“With major steel-exporting nations diverting supplies, India may face pricing pressures and market realignments. Additionally, if global economic sentiment weakens due to protectionist policies, it could affect overall steel demand,” he added. While India’s domestic steel consumption remains relatively strong, the industry must stay agile to navigate these evolving global trade challenges, Goel said.

Steel stocks ended Thursday's session 0.5%-1.1% lower, in line with the Sensex, which fell 0.4% to close at 76,312.19. Steel Authority of India Limited ended the session marginally in the green.

'Auto component tariffs will hit margins'

Meanwhile, the 25% tariff on auto components will weigh on the margins of Indian suppliers as it will be difficult for American carmakers to pass on the entire cost increase to customers, experts said.

“It needs to be seen on how higher tariffs are absorbed across the supply chain (customers, OEMs and suppliers). However, we believe there will be some impact, which the suppliers will have to bear, leading to negative implications on margins,” analysts at Kotak Institutional Equities said in a note on Wednesday.

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Shares of automotive component companies with a high exposure to the US fell on Thursday. These included Sona BLW Precision Forgings Ltd (-3.45%), Bharat Forge Ltd (-3.125), Samvardhana Motherson International Ltd (-2.61%) and Endurance Technologies Ltd (-1.22).

American automakers are lobbying for an exemption on tariffs for key parts such as engines, Bloomberg reported. Tesla chief Elon Musk, a staunch ally of US President Trump, said earlier on X that the tariffs would have a significant impact on his electric car company, given that it buys parts from overseas.