India and Vietnam Face Potential Setback from Trump’s Steel Tariffs

Vietnam and India, two of Asia’s rapidly expanding steel producers, could face challenges if former U.S. President Donald Trump proceeds with imposing widespread tariffs on steel imports.

The global steel sector is preparing for the potential fallout from Trump’s proposed 25% tariffs, set to take effect on March 12. While these measures are intended to strengthen protections for American steel manufacturers, they may also escalate international trade tensions, particularly as China continues to export large volumes of steel. In Asia, concerns are growing that steel products unable to enter the U.S. market could instead flood an already saturated regional market.

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“If these tariffs are enforced, we might witness an increase in steel shipments to Vietnam as exporters seek alternative destinations,” Nghiem Xuan Da, chairman of the Vietnam Steel Association, told Bloomberg in a phone interview. In recent years, Vietnam has emerged as both a significant consumer and exporter of steel.

Steelmakers worldwide, from Asia to Latin America and Europe, are already struggling with an influx of inexpensive Chinese steel, with China’s 2024 exports reaching a nine-year high of over 110 million tons. This surge has triggered multiple trade disputes—most recently from South Korea—and forced steel producers in other Asian nations to seek new markets.

Trade Conflicts

According to Trump’s executive order, China’s steel exports are “displacing production in other countries and forcing them to export greater volumes of steel” to the U.S. In response to increasing imports, the European Union is reconsidering its protective measures. Meanwhile, in Asia, India is weighing safeguards, Vietnam is examining Chinese steel imports, and South Korea may initiate further investigations into Chinese products.

Currently, several Asia-Pacific countries, including Japan, South Korea, and Australia, are exempt from the existing U.S. steel tariffs implemented during Trump’s first term. Canada, Mexico, and a few other nations also enjoy exemptions. The upcoming discussions will determine whether these countries will secure exclusions from any new tariff measures.

If exemptions are not granted, steel exporters may divert their surplus to other markets at competitive prices, intensifying global competition. “This could drive steel prices in India even lower, as they are already approaching a four-year low,” said Sehul Bhatt, director of research at Indian firm Crisil Intelligence.

Limited Impact and Special Steel Products

However, there are some limiting factors. The proposed tariffs—also covering aluminum—have yet to be finalized. Additionally, only a fraction of the Asia-Pacific region’s steel trade with the U.S. would be affected. In 2023, South Korea, Japan, and Australia exported approximately 3.75 million tons of steel to the U.S., compared to more than 20 million tons subject to tariff revisions globally, based on U.S. government data.

Moreover, certain specialized steel products are likely to continue reaching the U.S. market despite the tariffs, albeit at higher costs. Japan and South Korea manufacture high-quality steel used in critical sectors such as energy infrastructure and the automotive industry, making their products essential to American companies, according to Wood Mackenzie analysts Lawrence Zhang and Tiago Vespoli.

Another potential outcome is a reduction in global steel production rather than a complete redirection of excess supply. “The rest of the world could hardly absorb those volumes as global steel demand is pretty muted, which means the rest of the world, including China, will have to cut production,” said Xu Xiangchun, an analyst with Mysteel Global.