New Tariffs Threaten Indian and UAE Aluminium Exports to US
The recent increase of tariffs on aluminium imports imposed by the Trump administration is causing ripples through international trade, particularly affecting exports from India and the United Arab Emirates (UAE) to the United States. Starting March 12, 2025, the tariffs will rise from 10% to 25%, leading to potential challenges for traders as they rush to understand the impact on their businesses.
According to official trade data, India's aluminium exports to the US stood at $946 million (Rs 7,831 crore) for the financial year 2023-24, marking its position as the largest international market for Indian exporters. This figure is notable as it declined from the previous two years, where exports exceeded $1 billion annually. The market dynamics shifted significantly from 2016-17, where exports were merely $350 million, showcasing the growing importance of the US market for Indian aluminium firms.
Despite accounting for only 3% of total US aluminium imports, India has seen its share increase due to strong demand for aluminium conductors—stranded wires and cables pivotal for electrical applications. The US market for these conductors has been particularly strong, with exports soaring to $261 million in 2023 after less than $50 million just two years prior. The growth is attributed to heightened infrastructure spending and modernization of the electrical grid across several states, especially California and Texas, where investments have ramped up.
With the new tariffs encompassing broader categories, the indirect effects may disrupt the recent growth momentum. The tariffs' reach now includes not just primary aluminium but also semi-finished products and derivative goods, indicating significant challenges for the fragmented Indian aluminium sector. Recent analyses suggest these exports only account for 12% of India's total aluminium exports, indicating the nuanced impact of the tariffs on businesses focused on export-driven strategies.
On the other hand, the UAE has seen remarkably different trends. Reports reveal substantial growth burst of 300% increase, with 68,560.29 tonnes of aluminium shipped to the US within the first 11 days of March 2025 alone, compared to only 16,124.88 tonnes for the entire month of March 2024. The sharp surge highlights the urgency of US buyers seeking the UAE's aluminium as they prepare for impending tariffs.
With the UAE accounting for 8% of the total US aluminium consumption, its position remains strong as the second-largest aluminium supplier to the country. This shift occurred as many of the Gulf Cooperation Council (GCC) nations, collectively contributing 16% of US aluminium imports, reinforced their market presence through increased export activities to offset the tariff impacts.
Both India and the UAE navigated the global trade complexity. The sizable increase from the UAE to the US emphasizes how producers can react dynamically to market changes. This situation outlines not only their bilateral movements but also shows the resilience of the aluminium market, which, according to data, has previously reacted positively during tariffs by strategically increasing shipments before implementation.
Interestingly, the tariffs introduced now are not entirely new as, back in 2018, the Trump administration first set tariffs at 10% and 25% on various imports, including aluminium and steel. Despite those measures, the tariff exemptions granted to certain countries initially diluted their effect. Countries like Argentina, Australia, and the European Union enjoyed exemptions, which have since been adjusted with the latest measures.
Recent commentary from the administration points out significant loopholes have persisted, allowing some nations to evade these tariffs effectively. This raises questions about the effectiveness of such policies and their long-term sustainability. Given India's percentage of aluminium conductors entering the US market, it is imperative for the firms to adapt quickly to these tariffs.
Trade analysts are particularly cautious about the tariffs' expanded reach, particularly concerning the Indian aluminium sector. CareEdge Ratings indicated the direct and more immediate consequences might not be as impactful for India's steel sector compared to aluminium producers. With India’s steel exports to the US at just 4% of total exports as of calendar year 2024, the true test will be the resilience of smaller, downstream aluminium-producing firms as they contend with these amplified tariffs.
With the economic viability of such tariffs under scrutiny, the assessment of trade dynamics between these nations remains ever-evolving. Even as nations like India see their previously growing markets shift, the overall progression of international relations concerning tariffs and trade policies continues to be at the forefront of economic forums.
Iran's continued outsourcing of metal exports emphasizes the trade juggernaut at work within the GCC, establishing significant export channels and inevitably increasing their market share.
Looking to the future, Indian and UAE aluminium traders will need to closely monitor the developments around these tariffs to navigate the increasingly complex international trade environment. While the current stance may suggest obstacles, novel approaches could yield unexpected opportunities engendering lasting growth paths for both regions.