Tariffs hit Indian foundries

Trump's 50% steel tariff has put pressure on India's export-focused foundries, raising the specter of layoffs and plant closures.

US steel tariffs leave Indian foundries gasping

The decision by the United States to impose a 50% tariff on steel and a 25% levy on most Indian goods has jolted India's export-driven foundry sector, especially in eastern hubs like Kolkata. The measures, framed as national security protections under Section 232, have slowed new orders and left existing ones to clear at a pace that hurts cash flow. India exported about $4.56 billion worth of iron, steel and aluminium products to the United States last year, a resource that now faces new hurdles. The sector, dominated by small and medium enterprises, depends on steady access to US buyers to stay afloat.

The foundry industry in eastern India relies heavily on exports and employs more than 200,000 workers across more than 5,000 units, with more than 95% classed as small-scale operations. Because export orders are shrinking, domestic competition is intensifying as manufacturers flood the local market. Industry groups warn that margins could shrink by single digits or more, pushing some firms to rethink production cycles, labor and investments. India’s commerce ministry is pursuing a bilateral talk with the United States and considering measures such as interest subsidies, loan guarantees, and reduced certification fees to shield MSMEs. A safeguard duty on certain steel products, proposed at 12%, could help blunt Chinese price dumping in the domestic market.

The episode reveals a structural vulnerability in India’s economy: a heavy reliance on a single, volatile export channel. Tariffs in a major market can ripple quickly through small plants that lack the scale to absorb shocks. Policy makers face a delicate balancing act between pressing for market access and protecting domestic producers from abrupt price swings. The coming months will test India’s readiness to diversify markets, accelerate credit access for MSMEs, and adjust its industrial policy to weather protectionist storms.

Beyond the immediate economy, the clash underscores a wider strategic question: can India maintain a competitive edge while navigating a crowded global trade landscape that is growing more volatile and more enforceable through mechanisms like the European Union’s Carbon Border Adjustment Mechanism? The best path may require targeted supports that keep jobs intact while expanding the base of buyers beyond the United States and Europe, paired with reforms that ease certification and liquidity constraints for small foundries.

Highlights

Policy choices in the next months will determine whether thousands of workers keep their jobs or face further cuts.