The India-US trade deal announced on 2 February has improved sentiment across India’s industrial value chain. For steel, however, the impact remains indirect and downstream focused, Kallanish understands.
US Section 232 tariffs on steel, aluminium and copper remain at 50%, while selected auto components continue to face duties of 25%, keeping Indian direct steel exports to the US constrained.
Market participants broadly view the agreement as neutral for steel trade. A steel sector expert notes that Indian steel exports to the US were already minimal last year due to tariffs, and volumes were subdued even before recent increases. In this context, any easing of tariffs would be unlikely to materially revive exports, with “no major change” expected unless Section 232 terms are explicitly addressed.
Policy clarity also remains limited. An industry veteran cautions that details so far are confined to political statements and social media posts, and prefers to await formal documentation before reassessing the deal’s implications.
The immediate relevance for steel lies in downstream manufacturing. The reduction in reciprocal US tariffs on Indian goods to 18% from 50% materially improves the competitiveness of several export-oriented, steel-intensive sectors. Their expansion is expected to lift domestic steel consumption rather than generate direct export flows.
Engineering and capital goods represent the strongest transmission mechanism. Machinery and equipment account for 8.1% of India’s exports to the US and are identified as immediate beneficiaries, as per equity research firm SAMCO Securities’ latest note.
Lower tariffs could reduce the landed cost of Indian-made boilers, industrial machinery and nuclear equipment, which are intensive users of hot rolled coil and specialised plate. Higher order inflows in these segments typically translate into higher steel offtake.
Auto ancillaries offer a steadier but narrower upside. Export-oriented forgers benefit from improved pricing headroom, although Section 232 duties on specific components cap volume acceleration. The implication for steel demand is incremental, supporting alloy and forging-grade consumption.
Electronics manufacturing also gains at the margin. Electrical machinery is already India’s largest export category to the US by value. Tariff relief and the removal of punitive penalties support domestic production of electronic housings and solar components, reinforcing demand for galvanised and coated flat steel.
Currency movement provides an additional layer of support. The rupee strengthened by around 1.5% versus the dollar following the announcement. Brokerage firm Elara Securities expects the currency pair to trend towards INR 88.5-89/dollar in the coming weeks as external trade risks ease.
For steelmakers, rupee appreciation lowers the landed cost of imported metallurgical coal. Given India’s structural dependence on coking coal imports, this improves margin visibility, particularly if global steel prices remain rangebound.
India’s stated intent to increase purchases of US coal and energy could further stabilise sourcing, although this is viewed as a “long-term aspiration” rather than a firm commitment, says think-tank GTRI founder Ajay Srivastava.
India-US trade deal: steel impact matrix
| Channel / Sector | Key Data Points & Beneficiaries | Market View | Steel Sector Implication |
| Direct Steel Trade | US Section 232 tariffs remain at 50%. India exported $3.0bn in articles of iron/steel in CY24 | Restricted: no direct relief for primary mills | Minimal direct export upside; focus remains domestic |
| Engineering & Machinery | Accounts for 8.1% of US exports. Includes nuclear reactors, boilers, and heavy equipment | Immediate beneficiary: tariffs cut to 18% | Bullish: high intensity demand for HRC and heavy plate |
| Auto Ancillaries | Bharat Forge cited as a key gainer. Some parts still face 25% Section 232 duties | Partial relief: competitiveness boost for non-security parts | Steady pull for high-quality alloy and forging steel |
| Electronics & Solar | Largest export category ($12.6bn in CY24). Includes electrical machinery and mechanical parts | Strategic winner: rapid volume expansion expected | Increased offtake of coated and galvanized flat steel |
| Currency (USDINR) | Expected to trend towards 88.5-89. FPI flows reversing course | INR supportive: strongest level since late 2024 | Margin expansion: Significantly lowers landed cost of imported coal/scrap |
| Energy & Upstream | India committed to $500bn in US goods, including coal and energy | Long-term aspiration: 20-year timeline for total volume | Improves long-term input cost stability for blast furnaces, but lacks policy clarity |
| Industrial Infra | Relief for textiles and chemicals | Indirect growth: spurred by factory/warehouse expansion | Drives demand for structural steel and PEB sections |
Source: GTRI, Elara, SAMCO, Kallanish
