US President Donald Trump’s tariffs on steel & aluminium may have already started denting India’s exports of engineering goods with total exports this fiscal likely to be lower than the targetted $118 billion, per engineering goods exporters.
“Engineering goods exports dropped 7 per cent in February and may post a similar decline in March. Value of shipments in the entire fiscal 2024-25 may be $115 billion, instead of the targetted $118 billion. This would be only 6 per cent higher than last year’s $109 billion and not 10 per cent increase as was being earlier anticipated,” EEPC Chairman Pankaj Chadha told businessline.
Orders for engineering products started getting impacted in February itself in anticipation of the tariffs on steel that were imposed on March 12 because the voyage time from India to the US takes one and a half months. “By the time the goods shipped in February land in the US they would be tariffed,” an official explained.
Trump tariff
On March 12, the Trump administration announced a 25 per cent import tariff on steel and aluminium imported from all countries including India.
“Of our engineering goods exports worth $20 billion to the US annually, about $5 billion got affected by the 25 per cent tariffs announced by President Trump. Of this, about $1 billion worth of items were already in transit and would be hit by the tariffs once they reach their destination,” Chadha said.
As Trump is set to impose reciprocal tariffs on April 2 on many more items covering multiple sectors, more engineering goods could be subject to higher tariffs and the situation may worsen.
The Indian engineering industry has maintained growth momentum for most of the current financial year surpassing the performance of overall merchandise exports, which is almost flat. “While the medium and long-term outlook for the sector remains bright, challenges don’t seem to be subsiding in the short-term as US President Donald Trump has signaled that reciprocal tariff on steel and aluminium would kick in starting April,” per a note issued by EEPC earlier this month.
Top destination
The US is the top destination for engineering goods exports, and it may not be easy to diversify to other markets as the American duties were affecting all countries and competition everywhere would increase, another industry source pointed out.
“We are hopeful that the US India BTA would sort out the tariff problem between the two countries,” the source said.
India’s simple average tariff rate is significantly higher than the US, at 17 per cent compared to the US’ 3.3 per cent, according to WTO figures. India also has an over $35 billion annual trade surplus vis-a-vis the US.
New Delhi is set to offer tariff concessions to the US under the BTA and hopes to avert the April 2 reciprocal tariffs because of its efforts.
“Of our engineering goods exports worth $20 billion to the US annually, about $5 billion got affected by the 25 per cent tariffs announced by President Trump. Pankaj Chadha Chairman, EEPC