In a replay of events that unfolded in 2018-2019 during US President Trump’s previous term, a tariff tussle has again broken out. The US has imposed tariffs on imports from China, Canada and Mexico.

China and Canada have readily retaliated by announcing counter-tariffs on US-origin goods. Other countries, including India, are concerned that the tariff axe may fall on them too sooner rather than later.

As in the past, industrial metals are the first set of US imports to attract tariffs. In mid-February, Trump announced a 25 percent tariff on steel and aluminium imports, similar to his first tariff-related step 7 years ago in 2018.

So what is the implication of US tariffs on the world steel and aluminium markets? Trade in the two metals, aluminium and steel (including fabricated products like drums and cans), accounts for just about 3 percent of world trade, and within that, exports to the US are barely 0.25 percent of world trade.

To be sure, these tariffs are not game changers for the world industrial metals market. Canada may be affected, as it is the most exposed to the US market.

The impact on the Chinese economy will be negligible. The US already imposes a 47.5 percent tariff on Chinese steel and a 32.5 percent on Chinese aluminium. So the incremental impact of even higher tariffs will be small. China sent $ 2.5 billion worth of metals to the US last year.

Trump’s tariffs will have a bigger impact on steel prices than on aluminium. Steel prices are typically determined at local levels rather than by an international benchmark like that for aluminium.

The US import of steel is approximately one-third of its total domestic production, and a quarter of it comes from Canada. With tariffs, steel prices within the US will rise in the near term. Higher metal prices are sure to hurt the US construction industry.

At the same time, higher steel prices may incentivise greater domestic production. Steel producers in the US have enough spare capacity.

On the other hand, US tariffs may not affect the aluminium market much, primarily because China, and not the US tariff, matters most for the global market. To be sure, China accounts for a whopping 60 percent of global aluminium consumption, while the US accounts for a mere 8 percent.

The Chinese economy has been slowing for a host of reasons, including the ongoing housing sector challenges that may continue to play out in 2025 too. A series of stimulus measures provided by the government is sure to deliver a small improvement in domestic consumption. If the Chinese economy slows with the fading effects of extant stimulus, aluminium prices may come under downward pressure.

China’s GDP growth rate for 2025 is projected to be moderate at 4.5 percent. A high-level policy meeting scheduled for this week in Beijing will be keenly watched for additional stimulus signals and new policy interventions.

In general, tariffs will keep US inflation high, and consumers will have to bear the additional burden. Inflation would also mean that the US Federal Reserve would be in no hurry to accelerate the interest rate cut; the process would be measured, moderated, and data-driven.

The US dollar is expected to remain relatively strong in 2025. This in turn will pressure the currencies of emerging markets. The effect of a strong dollar on the Indian rupee is evident.

For India, the macroeconomic fundamentals are sure to help it stay on a firm footing. This will support consumption demand. The incipient signs of a gradual pickup in demand are visible.

India’s direct steel export to the US is relatively low; just about 4 percent of total exports. So there will be no big impact. Indeed, domestic demand for steel within the country is robust and has been growing at 10-12 percent in the last three years.

But one risk India must guard against is that major steel suppliers to the US, affected by tariffs, may divert their goods to India. China, in particular, will have a large export surplus.

As for aluminium, India’s export of the primary product is approximately 40 percent of domestic output. Of this, exports to the US are 6-8 percent. So, Indian aluminium producers will face more tariff impact than steel producers.

Yet, India will not be worse off due to US tariffs. India is a low-cost aluminium producer, and its products are cost-competitive in the global market. Additionally, huge reserves of quality bauxite are available. This acts as a cushion to face competition from any oversupply situation.

For the global industrial metals market, the situation is still evolving and may crystallise in the next 2-3 months.

G. Chandrashekhar is economist, senior journalist and policy commentator specialising in commodity markets. He serves as Independent Director on corporates boards and is an Independent Member of SEBI – CDAC. Views are personal