US Tariffs on Steel and Aluminium

The United States has recently reaffirmed its stance on tariffs imposed on steel and aluminium. This decision was communicated to the World Trade Organisation (WTO) following India’s request for consultations regarding these tariffs. The U.S. claims these tariffs are based on national security concerns rather than being classified as safeguard measures.

Background of Tariffs

In March 2018, the U.S. introduced tariffs of 25% on steel and 10% on aluminium. These tariffs were justified under Section 232 of the Trade Expansion Act, which allows for such measures to protect national security. The tariffs took effect on March 23, 2018, and have been a point of contention in international trade discussions.

India’s Response

India has challenged the U.S. classification of these tariffs. The Government of India argues that the tariffs function as safeguard measures, which should be notified to the WTO under the Agreement on Safeguards. India requested consultations on April 11, 2025, to address these concerns and seek clarity on the U.S. rationale.

U.S. Justification for Tariffs

The U.S. maintains that its tariffs are not safeguard measures. In a communication dated April 17, 2025, the U.S. reiterated that these tariffs are necessary for national security and are supported by provisions in the General Agreement on Tariffs and Trade (GATT) 1994. The U.S. brought into light that no notification was required under the Agreement on Safeguards since the tariffs are not imposed under that framework.

Implications for Global Trade

The ongoing dispute between the U.S. and India marks the complexities of international trade laws. It raises questions about the interpretation of national security and its implications for global trade agreements. The U.S. has expressed willingness to discuss the matter further with India, indicating potential for dialogue despite the current tensions.

Future Developments

Recently, the U.S. revised its tariff measures, extending their duration indefinitely. This change reflects a strategic decision to maintain these tariffs as a long-term policy rather than a temporary measure. The international trade community will be closely monitoring the developments in this case.

Questions for UPSC:

1. Critically analyse the implications of the U.S. tariffs on steel and aluminium for global trade dynamics.
2. Explain the provisions of Section 232 of the Trade Expansion Act and its relevance in international trade disputes.
3. What are the key differences between safeguard measures and national security tariffs? Provide examples.
4. What is the role of the World Trade Organisation (WTO) in resolving trade disputes? How does it affect member countries?

Answer Hints:

1. Critically analyse the implications of the U.S. tariffs on steel and aluminium for global trade dynamics.

1. The tariffs disrupt traditional trade relationships, leading to retaliatory measures from affected countries.
2. They may escalate trade tensions, causing uncertainty in global markets and affecting investment decisions.
3. Countries may seek alternative suppliers, impacting global supply chains and pricing structures.
4. The situation tests the effectiveness of international trade agreements and the WTO’s role in dispute resolution.
5. Long-term implications may include shifts in trade policies and a reevaluation of national security considerations in trade.

2. Explain the provisions of Section 232 of the Trade Expansion Act and its relevance in international trade disputes.

1. Section 232 allows the U.S. to impose tariffs based on national security concerns related to imports.
2. It grants the President authority to take action if imports threaten national security interests.
3. This provision has been invoked to justify tariffs on steel and aluminium, raising questions about its interpretation.
4. Relevance in disputes lies in its potential to bypass traditional trade rules and the WTO framework.
5. Critics argue it undermines international trade norms by prioritizing national security over trade agreements.

3. What are the key differences between safeguard measures and national security tariffs? Provide examples.

1. Safeguard measures are temporary restrictions applied to protect domestic industries from sudden import surges, while national security tariffs are based on perceived threats to national security.
2. Safeguard measures require notification to the WTO and consultations, whereas national security tariffs may not follow these protocols.
3. Examples of safeguard measures include quotas or tariffs on specific imports to prevent market disruption.
4. National security tariffs, like those on steel and aluminium under Section 232, are justified by national interests rather than economic factors.
5. The distinction affects how countries can respond and engage with the WTO when disputes arise.

4. What is the role of the World Trade Organisation (WTO) in resolving trade disputes? How does it affect member countries?

1. The WTO provides a framework for negotiating trade agreements and resolving disputes between member countries.
2. It facilitates consultations and dispute resolution processes, helping to ensure compliance with international trade rules.
3. Decisions made by the WTO can lead to binding resolutions, impacting national trade policies.
4. Member countries benefit from a structured approach to address grievances and maintain trade stability.
5. The effectiveness of the WTO in resolving disputes can influence global perceptions of trade fairness and cooperation.