India has escalated its trade dispute with the United States by proposing retaliatory duties under World Trade Organisation (WTO) norms, targeting U.S. imports in response to American tariffs on Indian steel and aluminium. The move, announced on May 9, 2025, aims to offset the adverse effects of U.S. safeguard measures, which India claims violate WTO agreements.
The proposal comes amid ongoing bilateral trade talks and follows years of tensions over U.S. tariffs imposed on national security grounds, further complicating negotiations for a bilateral trade agreement (BTA).
India’s Retaliatory Proposal
In a communication to the WTO’s Council for Trade in Goods, received on May 9, 2025, India notified its intent to suspend concessions and other obligations equivalent to the trade impact of U.S. tariffs on Indian steel and aluminium.
According to the communication, U.S. safeguard measures affect $7.6 billion in Indian exports, generating $1.91 billion in duty collections for the U.S. India’s proposed retaliatory duties would impose an equivalent amount of tariffs on selected U.S.-origin products, ensuring a balanced response under WTO rules.
“The proposed suspension of concessions or other obligations takes the form of an increase in tariffs on selected products originating in the United States,” the WTO communication stated. India reserved the right to adjust the targeted products and tariff rates, as well as to withdraw, modify, or supplement the notification as needed. The measures would take effect 30 days after the notification, unless consultations resolve the dispute.
India emphasised that the U.S. tariffs, extended on February 10, 2025, and effective from March 12, 2025, constitute safeguard measures despite U.S. claims of national security justification. “India maintains that the measures taken by the US are not consistent with the GATT 1994 and the Agreement on Safeguards (AoS),” the communication noted, highlighting the lack of prior consultations as required under WTO rules.
Background of the Dispute
The trade dispute traces back to March 8, 2018, when the first Trump administration imposed a 25 per cent tariff on certain steel products and a 10 per cent tariff on aluminium products, citing national security concerns under Section 232 of the Trade Expansion Act of 1962. These tariffs, effective from March 23, 2018, were extended in January 2020 and further revised on February 10, 2025, maintaining the 25 per cent tariff on steel and aluminium with no expiration date.
India challenged the tariffs in April 2025, requesting consultations under the WTO’s Agreement on Safeguards. The U.S. responded by asserting that the tariffs were not safeguard measures but national security actions, exempt from WTO oversight. India rejected this argument, noting that the U.S. failed to notify the WTO of the measures, a requirement for safeguard actions under the Agreement on Safeguards.
In June 2019, India retaliated against the initial tariffs by imposing higher customs duties on 28 U.S. products, including almonds, walnuts, and apples, affecting $1.4 billion in U.S. exports. India also filed a formal complaint with the WTO, alleging violations of global trade rules. The current proposal marks a significant escalation, as India seeks to impose duties on a broader range of U.S. goods to match the $1.91 billion trade impact.
India’s Legal and Strategic Position
India’s WTO communication underscores its commitment to adhering to multilateral trade rules while defending its economic interests. The country argues that the U.S. tariffs violate the General Agreement on Tariffs and Trade (GATT) 1994 and the Agreement on Safeguards, particularly due to the lack of transparency and consultation. By reserving the right to suspend “substantially equivalent” concessions, India aims to restore trade balance while keeping the door open for dialogue.
“India will inform both the Council for Trade in Goods and the Committee on Safeguards of its next steps,” the communication stated, signaling ongoing engagement with WTO bodies. India’s flexibility to adjust its retaliatory measures reflects a strategic approach, balancing escalation with the potential for a negotiated resolution.
The proposal also aligns with India’s broader trade strategy, as it navigates bilateral talks with the U.S. A high-level Indian delegation is currently in the U.S. for discussions on a potential bilateral trade agreement (BTA), which aims to address tariff barriers, market access, and other trade issues. The timing of the WTO proposal underscores India’s resolve to protect its exporters while pursuing a comprehensive trade deal.
Implications for India-U.S. Trade Relations
The escalating trade dispute threatens to strain India-U.S. economic ties, which have grown significantly in recent years. Bilateral trade in goods and services reached $191 billion in 2024, with India exporting $83 billion in goods to the U.S., including steel and aluminium products critical to industries like automotive and construction. The U.S. tariffs have disrupted Indian exporters, who face higher costs and reduced competitiveness in the American market.
The dispute also complicates negotiations for the BTA, which both countries view as a framework to deepen economic cooperation. Key issues in the talks include tariff reductions, intellectual property rights, and agricultural market access. India’s retaliatory duties could prompt U.S. countermeasures, potentially derailing progress toward a trade agreement.
Global Context and WTO Dynamics
India’s proposal highlights broader tensions within the WTO, where safeguard measures and national security exemptions have become contentious issues. The U.S. has increasingly invoked national security to justify trade restrictions, a practice criticised by trading partners like the European Union, China, and Canada. India’s challenge adds to the growing pressure on the WTO to clarify the scope of such exemptions and enforce compliance with global trade rules.
The WTO’s dispute settlement mechanism, currently hampered by a non-functional Appellate Body due to U.S. opposition to judge appointments, may limit India’s ability to seek a binding resolution. However, India’s proactive engagement with the Council for Trade in Goods and the Committee on Safeguards signals its intent to leverage multilateral forums to address the issue.
Domestic and International Reactions
In India, the government’s move has been welcomed by domestic steel and aluminium producers, who have faced significant losses due to U.S. tariffs. Industry leaders urged the government to expedite retaliatory measures while continuing bilateral talks to secure exemptions or tariff reductions. “The U.S. tariffs have hurt our competitiveness, and India’s response is a necessary step to level the playing field,” said a spokesperson for the Indian Steel Association.
Internationally, trade analysts view India’s proposal as a calculated move to assert its rights within the WTO framework. “India is signalling that it won’t accept unilateral trade actions without a fight,” said Dr. Arpita Mukherjee, a trade policy expert at the Indian Council for Research on International Economic Relations. “The challenge now is to balance retaliation with diplomacy to avoid a broader trade war.”
Next Steps and Outlook
India has signalled its readiness to implement retaliatory duties after June 8, 2025, unless consultations with the U.S. yield a resolution. The Indian delegation’s ongoing visit to the U.S. provides a critical opportunity to address the tariff dispute bilaterally, potentially averting further escalation. Both sides are under pressure to find common ground, given the strategic importance of their economic and geopolitical partnership.
The WTO’s Council for Trade in Goods and Committee on Safeguards will review India’s notification in the coming weeks, potentially shaping the trajectory of the dispute. Meanwhile, India’s reservation of rights to modify its retaliatory measures suggests a dynamic approach, with the possibility of targeting high-value U.S. exports like agricultural products, pharmaceuticals, or technology goods.
