Impact of US Tariffs on Indian Steel Foundries
The work in Kolkata, an important center for India’s steel foundry that exports sanitary products, has slowed down or stopped. Owners discuss the situation privately, but do not share much publicly, leaving employees confused. However, some owners, like Vijay Shankar Beriwal from Calcutta Iron Udyog, are speaking out against the 50% tariff on steel and aluminum imposed by US President Donald Trump.
Background of the Tariffs
The 50% tariff, part of Trump’s protectionist trade policy, was introduced in June, citing national security concerns. In addition to the steel tariffs, Trump imposed 25% "mutual tariffs" on most Indian goods. The US President has also proposed an additional 25% tariff in response to India’s purchases of Russian oil.
Effects on the Industry
The full effects of the tariffs have not yet been felt, but the stressors have started to show. Those with existing US orders will be affected quickly, but new orders are slow or absent. Many foundries have stopped working. The 50% steel and aluminum tariff threatens to suffocate the export-oriented foundries and medium and small companies (MSMES) in East India, which are strongly based on the US market.
Indian Steel Exports to the US
India exported iron, steel, and aluminum products worth $4.56 billion to the US last year, including $587.5 million worth of iron and steel, $3.1 billion worth of iron or steel products, and $860 million worth of aluminum products. This accounts for around 5.3% of India’s total exports.
Massive Blow to Smaller Foundries
Although smaller foundries represent a lower part of the industry, they employ over 200,000 workers in labor-intensive production in more than 5,000 units, of which over 95% are classified as small. In contrast to foundries in states like Maharashtra or Tamil Nadu, which cater to domestic automotive and hardware stores, the foundries in East India specialize in export-oriented castings, making them particularly susceptible to tariff disruptions.
Government Response
The Indian Minister of Commerce, Piyush Goyal, has downplayed the effects of the tariffs on steel and aluminum, arguing that steel and aluminum exports to the US are negligible. However, industry experts warn that MSMES could be faced with layoffs and closures at the beginning of 2026 without quick measures.
Chinese Steel Dumping
The domestic market is also under pressure, with manufacturers flooding the local market and tightening competition. The Federation of Indian Export Organizations (FIIO) estimates an 85% decline in US steel exports, leading to an excess that could reduce domestic steel prices by 6-8%, further squeezing MSME margins. China’s ability to redirect inexpensive steel to India threatens smaller manufacturers, with India becoming a net importer of finished steel since the 2023-24 financial year.
Need for Government Intervention
The foundry sector mainly includes small players with tight profit margins. With the 50% tariff, orders have become cost-prohibitive, and diverting markets to the Middle East or Southeast Asia requires time and capital that many of these companies lack. The Indian government is reacting to the situation with a multi-stage strategy, including pursuing a bilateral trade agreement with the US to reduce tariffs and considering measures such as interest subsidies, loan guarantees, and reduced certification fees to support MSMES.
Urgent Support Needed
The industry urgently needs certain support from the government to stay afloat. Without quick measures, MSMES could be faced with layoffs and closures at the beginning of 2026. The government’s intervention is crucial to protect the foundries and ensure the survival of the industry.
