The stock market crashed Tuesday - the Sensex fell by 1,038 points and the Nifty by over 300 points, each by around 1.32 per cent - a day after United States President Donald Trump announced a 25 per cent tariff on import of steel and aluminium.
A key poll promise, Trump's tariff hike - the rate for aluminium, for example, has been increased from 10 per cent to 25 per cent - will take effect from March 4, and will apply to all imports of that product and steel, including those from Canada and Brazil, the US' top two suppliers of each last year.
These were announced two days before Prime Minister Narendra Modi is due in the US.
Ahead of that visit, Mr Modi has said the meeting will offer "an opportunity to build upon the successes of our collaboration in his first term and develop an agenda to further deepen our partnership".
READ | "Chance To Build On Our Collaboration": PM On Trump Meet In US
The two leaders' meeting will also take place against the backdrop of a political row in India over the manner in which the US deported 104 Indian immigrants living illegally in that country.
Trump's Steel, Aluminium Tariffs
Meanwhile, the tariffs, also on finished metal products, are meant to crack down on what Trump claims are efforts by countries like Russia and China to circumvent existing duties. Trump also claims the tariffs will boost domestic production and provide more jobs to Americans.
READ | Trump Announces 25% Tariffs On All Steel, Aluminum Amid Trade War
India is a relatively minor steel supplier to the US; by some estimates, last year New Delhi sold less than 100,000 tonnes of steel to Washington, D.C. However, India is one of the world's largest primary producers of aluminium, and the United States is its top export market.
Aluminium exports to the US, therefore, could see a drop in light of Trump's tariff, industry executives told Reuters this week. Aluminium producers - such as Vedanta and Hindalco - would eventually find alternative markets, but it will take time for these to absorb the excess.
Elsewhere, Canadian steelmakers have warned of "massive disruption", and the European Commission said it would "protect interests of European businesses, workers, and consumers."
Around 25 percent of steel produced by Europe is sold to the US.
Trump Targets India
Trump has previously called India a "very big abuser" on trade, and his top economic adviser Kevin Hassett singled out the country as having "enormously high" tariffs in a CNBC interview.
Last month he named India, Brazil, and China as countries "mean us harm".
READ | "America First": Trump Vows Tariffs On Nations That "Mean To Harm" US
Amid Trumps' tirade on tariffs, India this month slashed custom duties on import of American products, such as high-end motorcycles and cars, and smartphone components, in a move that is expected to benefit American corporate giants like Harley-Davidson, Tesla, and Apple.
READ | Amid Tariff Threats, India Cuts Import Duty On US Bikes, Cars
However, Finance Minister Nirmala Sitharaman has said custom duty rationalisation was not India's response to Trump's tariff announcements. "We are looking to strengthen the foundation of the Indian economy," she told NDTV in an exclusive post-Union Budget 2025 interview.
Tariffs In Trump 1.0 And 2.0
Trump introduced similar tariffs during his first term (2017-2021) but then made concessions, i.e., duty-free quotas, to some nations, such as Canada and Mexico, and his successor, Joe Biden, negotiated further exemptions for Britain, Japan, and the European Union.
The US did see a bump in manufacturing employment as a result of tax cuts in Trump's first term, but things changed after he introduced the steel and aluminum tariffs in March 2018.
In 2019, the first full year after those tariffs took effect, the US lost manufacturing jobs and the broader factory sector entered a slump with industrial production falling.
Now in his second term, Trump has shown an increasing willingness to use tariffs; for example, he threatened Colombia with a 25 per cent levy after it refused to accept military planes carrying illegal immigrants, in whose transportation President Gustavo Petro had red-flagged potential rights abuses.
He has already also levied equally high tariffs on all imports from Canada and Mexico, the US' two largest trading partners, demanding they do more to stop illegal narcotics crossing the US border. These were later paused till March 1 after border security concessions were negotiated.
But Trump went ahead with tariffs on China, the world's second biggest economy, declaring Chinese-made products entering the US face an extra 10 per cent levy. Beijing retaliated with tariffs - which came into effect Monday - targeting American coal and liquified natural gas.
With input from agencies
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