US President Donald Trump has virtually dropped another bomb on the global economy with his impromptu announcements aboard Air Force One on levying 25 per cent duty on steel and aluminium imports and reciprocal duty on all other imports from all countries. India is the ninth largest exporter of steel to the US with $1.9 billion sales and tenth largest export of aluminium, with a sale of $270-million worth metal in 2024. While the world was aware about Trump’s unconventional policies, his blanket threat to impose reciprocal tariffs — without any exceptions — almost upends the World Trade Organisation’s (WTO) mandate to promote free trade by eliminating tariffs, quota and other restrictions.The free trade regime in the last 20 years kept inflation in manufactured products under control globally. However, Trump’s populist agenda to find jobs for his support base consisting of semi-literate people in the US rust belt could damage the US-led alliance based on the Bretton Woods system.While the immediate threat from Trump’s tariff on steel and aluminium could be negligible as the total Indian exports in both the metals are worth little over $2 billion, the Indian economy could face the heat from fleeing foreign investors which could affect stock valuations, and rupee weakness which could result in imported inflation. Though India’s strategic value is greater for the US, its share in the US imports is merely 2.6 per cent at $82.9 billion. Similarly, India’s share in US exports is 2.48 per cent or $48 billion, leaving a favourable trade balance of $34.4 billion for India. It is this trade surplus that India enjoys with the US that Trump is focused on and wants India to buy more from his country.Nevertheless, American manufactured products can never compete with those made in India even if they are imported into India with a zero duty. Prime Minister Narendra Modi should, therefore, during his visit to the US offer a free trade agreement.
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