A global wave of protectionism and tariff hikes, along with repeated calls from India’s steel industry, has once again brought the issue of steel import duties into the spotlight. The directorate general of trade remedies has now recommended a provisional safeguard duty of 12% on steel imports, including shipments from China and Vietnam. The objective is clear: to curb the influx of cheap steel and protect domestic producers. If implemented, the proposed measure would offer much-needed relief to Indian steel mills, which are currently struggling with shrinking margins and falling local prices.
The DGTR has proposed imposing the duty for 200 days, pending a final determination from its ongoing investigation. Earlier reports had suggested a much steeper 25% safeguard duty for a two-year period. While the current proposal is more modest, it could still have a significant impact—potentially cutting India’s steel imports by up to 50% in FY26, while improving domestic manufacturers’ profitability.
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The recommendation exempts imports from other developing countries (excluding China and Vietnam). The safeguard duty would apply to various steel products, including hot-rolled and cold-rolled coils, sheets, plates, and metallic or colour-coated steel. However, stainless steel and specific specialty steel products—such as CRGO, CRNO, electro-galvanised steel, tinplate, and others—are excluded. The DGTR has also proposed a price ceiling, meaning steel imports priced above a certain level would not attract the safeguard duty.
What’s ailing India’s steel industry
The primary concern is surging cheap imports from China, the world’s largest steel producer, which leverages cost-effective production to dominate global markets. India, which was a net steel exporter just a year ago, has now become a net importer—a dramatic shift attributed to a sudden and substantial increase in inbound shipments.
Vietnam is also in focus, with the government uncovering instances of trade circumvention—where Chinese steel is routed through Vietnam to exploit zero customs duty under the India-ASEAN Free Trade Agreement.
In fact, a significant portion of Chinese steel exports—nearly 40%—is directed to ASEAN nations, South Korea, and Japan, which enjoy FTA benefits with India. This creates a backdoor route for low-cost Chinese steel into Indian markets. Imports from both China and Vietnam now account for more than 3% each of India’s total steel imports, unlike other developing countries that individually contribute less than 3%.
Global headwinds and non-tariff barriers
The problems aren’t unique to India. The global steel industry is grappling with overcapacity, rising protectionism, and volatile trade dynamics. Developed economies such as the US, EU, and Japan have responded with stringent tariffs and trade barriers. The US, under President Donald Trump, imposed a 25% tariff on metal imports and signalled continued trade friction with China.
To offset weakening domestic consumption, Chinese steelmakers are ramping up exports to Asia and beyond. Analysts warn that if Chinese access to North American markets tightens further, currency devaluation could be used to maintain competitiveness—raising the risk of dumping in markets like India.
Expected gains and lingering concerns
The DGTR proposal is currently under review by the ministry of commerce. If approved, it could enhance steelmakers’ EBITDA per tonne, a key profitability metric. However, industry leaders remain cautious about launching capacity expansion projects due to continued price pressures, stiff import competition, and slow government infrastructure spending.
Domestic steel prices have already risen 5% in anticipation of the safeguard duty, and with prices now 7–8% above import parity, further increases seem unlikely. Simultaneously, global trade restrictions are intensifying, with Vietnam, South Korea, Europe, and the US raising tariff barriers, while several countries, including India, are conducting investigations into steel imports.
The Indian Steel Association, which represents large integrated producers, is expected to push for a 25% duty, arguing that the lower DGTR proposal falls short. However, this higher tariff faces resistance from sectors like automobiles and infrastructure, which are concerned about escalating input costs.
Protectionism comes at a price
Despite potential benefits, critics caution that blanket protectionism can backfire. With thousands of steel grades catering to a wide array of applications, across industries, broad-spectrum tariffs can become inflationary and deter investments.
The government must closely examine whether steel imports are flooding segments where domestic supply is abundant—or whether they fill critical gaps in high-end, specialty steel that Indian mills do not produce. For example, sectors like aerospace, defence, and automobiles require advanced steel grades that are still not manufactured in India.
Industries will naturally prefer domestic suppliers—if the steel meets technical standards and is competitively priced. The production-linked incentive scheme for specialty steel, launched in 2021, aims to address this gap. However, it requires significant momentum to deliver results. In this context, targeted, country-specific tariffs would be more effective than sweeping safeguard duties.
Ultimately, the success of the safeguard measure hinges on whether it protects Indian steelmakers without burdening user industries or undermining competitiveness. The policy must strike a balance—between shielding domestic production and ensuring that India’s economic engine does not stall under the weight of protectionist overreach.