India Tells WTO it May Levy Retaliatory Tariffs on U.S. Imports

Syllabus: GS3/Economy

Context

• The Indian government has notified the World Trade Organization (WTO) of its proposal to levy retaliatory tariffs amounting to nearly $724 million on the U.S..

About

• The move follows the United States’ decision to extend safeguard tariffs—amounting to a 25% ad valorem increase—on imports of passenger vehicles, light trucks, and certain automobile components from India.
• The proposed suspension of concessions by India or other obligations would take the form of an increase in tariffs on selected products originating in the US.

Background of U.S. Tariffs

• Originally imposed in 2018 under President Trump, these tariffs targeted steel (25%) and aluminium (10%) on national security grounds.
• In 2025, during Trump’s second term, the U.S. eliminated country- and product-specific exemptions, affecting India directly.
• The U.S. declined to hold consultations, claiming the tariffs were national security measures, not safeguards.

WTO Safeguards Agreement

• Article 12.3 of the WTO Safeguards Agreement requires a country planning safeguard measures to consult affected members in advance, providing them an opportunity to discuss the proposed action and seek clarification.
• Article 12.5 of the WTO Agreement on Safeguards allows a member country to notify its intention to suspend trade concessions if another member imposes safeguard measures without proper consultation.

India’s Position

• India maintains that the measures taken by the United States are not consistent with the General Agreement on Tariffs and Trade 1994 (GATT 1994) and Agreement on Safeguards (AoS).
• Further, it said that since the U.S. did not hold mandatory consultations under Article 12.3 of the AoS, India had the right to retaliate. 
  • India reserves the right to suspend concessions or other obligations that are substantially equivalent to the adverse effects of the measure to India’s trade.
• WTO Monitoring: India will inform the WTO’s Council for Trade in Goods and Committee on Safeguards of its actions.

Implications

• Bilateral Trade: The estimated trade affected by the US action is valued at $2.9 billion, with India seeking to reciprocally recover $723.75 million annually through its proposed tariff measures.
• Trade Deal: The timing of India’s notification is significant, it comes amid heightened expectations of a breakthrough in the ongoing India-US Bilateral Trade Agreement (BTA) negotiations.
  • The move could be seen as an attempt by India to build negotiating leverage, especially as it pushes for the removal of US safeguard duties as part of the final deal contours.
• WTO Rules and Reform: The disagreement over whether national security tariffs constitute safeguard measures adds to broader debates on WTO’s relevance and enforcement capacity.

Conclusion

• The proposal assumes significance as both countries are negotiating a bilateral trade agreement (BTA). 
• Trade analysts say that India’s WTO notification is a legal and strategic step, signaling its readiness to retaliate against the US safeguard duties on automobiles and parts.

Source: TH