India ranks ninth on the list of trading partners that run a trade surplus with the U.S.— it exports more to the U.S. than what it imports. China, Mexico and Japan lead the list and even Vietnam runs a higher surplus against the U.S. than India does, according to U.S. government data.
U.S.-India Trade In 2017
- India ranked 9
- Exports: $25.7 billion
- Imports: $48.6 billion
- Total Trade: $74.3 billion
- Percent of total trade: 1.9 percent
Diamonds top the list of Indian goods exports to the U.S., amounting to over $8 billion last year. Pharmaceuticals, apparel, fish and shellfish petroleum products and organic chemicals are among the top 10 U.S. imports from India.
The Metals Impact
India is a minor exporter of the two metals that U.S. President Donald Trump has announced tariffs on—steel and aluminium. The formal tariff orders are expected to be signed this week.
While India is among the top four manufacturers of steel globally, it exports less than 10 percent of its total production. According to government data, India exported just over Rs 10,600 crore of iron and steel, and articles thereof, to the U.S. in financial year 2016-17.
According to an HSBC Global Research report, India accounts for approximately 2 percent of U.S. steel imports—Canada, Brazil and Korea top the list. While the direct tariff impact on India will be minimal, global prices will likely remain under pressure, said the report.
- Exports to be rerouted to other markets and hence prices will remain under pressure.
- A 1 percent drop in steel prices could lead to 2-10 percent contraction in steelmakers’ Ebitda estimates.
A Morgan Stanley report made a similar assessment and pointed out that India’s steel exports to the U.S. represent less than 1 percent of total India production and about 4 percent of India’s steel exports. Any rerouting of steel exports from other countries to India is unlikely and strong growth in domestic steel demand could absorb any incremental domestic supply, the report said.
The key to watch, we believe, would be rising risk of counter measures from other countries that may trigger trade issues, leading to pressure on steel and Aluminiumprices outside the U.S. However, with safeguard duty (for steel) still in place and domestic steel prices at a discount to global steel prices (on import parity), a potential increase in steel imports into India is unlikely.Morgan Stanley Research
China is the world’s largest aluminium producer and accounts for over 50 percent of the metal’s global trade. India accounts for only 5 percent of global primary aluminium production. In financial year 2016-17, India exported Rs 2,346 crore of aluminium and aluminium products to the U.S, according to Indian government data.
A Kotak Institutional Equities report said India’s aluminium exports constitute 2 percent of total U.S. imports of the metal.
The 25 percent import tariff on steel and 10 percent on aluminium by the U.S. can result in lower exports from other countries—steel exports to U.S. can decline by 9-14 million tons (0.6-0.9 percent of global demand) and aluminium by 600-700 kt (0.9 percent). We believe the extent of a potential steel mill, aluminium smelter restarts in the U.S. will not be meaningful to significantly weaken the outlook on global aluminium and steel, especially given supply-side reforms in China in these industries.Kotak Institutional Equities Report
Despite the limited exposure, shares of metal companies in India traded lower on Monday, the first trading day after the tariff announcement.