What Happened
- The US administration is reportedly planning to scale back tariffs on steel and aluminium products that were raised to as high as 50% last year
- Officials at the USTR and Commerce Department are reviewing the product list and considering exemptions for derivative products (goods made with steel and aluminium)
- The rollback follows mounting pressure from domestic businesses, global allies, and US lawmakers who argued the tariffs raised costs for American manufacturers and consumers
- Studies by the Congressional Budget Office and the Federal Reserve Bank of New York found that American businesses and consumers bore nearly 90% of tariff costs in 2025
- The administration plans to halt the expansion of tariff lists and launch more targeted national security probes into specific goods instead
Static Topic Bridges
Section 232 of the Trade Expansion Act, 1962
Section 232 of the Trade Expansion Act of 1962 authorises the US President to adjust imports through tariffs or other measures if the Department of Commerce finds that certain imports threaten national security. It was first used significantly in 2018, when President Trump imposed 25% tariffs on steel and 10% on aluminium imports from most countries, based on Commerce Department investigations initiated in April 2017 that found global excess capacity threatened US domestic metal industries. Before 2018, the last time Section 232 was used to impose trade restrictions was in 1986.
- Legal authority: Section 232 of the Trade Expansion Act of 1962
- 2018 tariffs: 25% on steel, 10% on aluminium (imposed March 8, 2018)
- 2025 escalation: Tariffs were raised up to 50% and expanded to cover derivative products
- Country-specific exemptions were negotiated with certain allies (EU, Japan, UK) under quota systems between 2018-2022
- India did not receive any exemption and was subject to the full Section 232 tariffs
Connection to this news: The reported rollback represents a partial reversal of the escalated Section 232 tariffs, particularly on derivative products, though the core steel and aluminium tariffs may remain in place under a more targeted enforcement approach.
Tariff Impacts — Incidence and Deadweight Loss
Economic theory distinguishes between the statutory incidence of a tariff (who legally pays it) and the economic incidence (who actually bears the cost). When importing countries impose tariffs, the cost is typically passed on to domestic consumers and businesses through higher prices, unless the foreign exporter absorbs the cost by reducing its price. The Federal Reserve Bank of New York and other studies on the 2018-2025 US tariffs found that nearly the entire tariff burden fell on American importers and consumers, not on foreign exporters — contradicting claims that tariff revenue comes from foreign countries.
- Congressional Budget Office and NY Fed studies: ~90% of tariff costs borne by US businesses and consumers in 2025
- Tariffs on intermediate goods (steel, aluminium) raise production costs for downstream US manufacturers (automobiles, construction, appliances)
- Deadweight loss occurs as tariffs distort production and consumption decisions away from the efficient free-trade equilibrium
- Retaliatory tariffs by affected countries further reduce trade volumes and global welfare
Connection to this news: The planned rollback is driven precisely by these economic effects — US businesses have lobbied that tariffs on derivative steel and aluminium products are difficult to calculate, raise manufacturing costs, and make American goods less competitive globally.
India-US Trade Relations and Tariff Dynamics
India-US bilateral trade has grown significantly, reaching approximately $190 billion in goods and services in FY 2024-25. However, tariff disputes have been a recurring friction point. The US has classified India as a non-market economy for steel dumping investigations, and India imposed retaliatory tariffs on US goods following the 2018 Section 232 tariffs. The recent India-US interim trade deal (February 2026) saw the US lower its reciprocal tariff on India from 25% to 18%, while India agreed to reduce tariffs on US industrial and select agricultural goods.
- India's steel exports to the US were impacted by the 25% Section 232 tariff since 2018
- India imposed retaliatory tariffs on 28 US products (almonds, apples, walnuts, etc.) in June 2019
- India-US interim trade deal (February 2026): US reciprocal tariff on India reduced from 25% to 18%
- India is among the top 10 steel-producing nations globally (approximately 140 million tonnes annual capacity)
Connection to this news: Any US rollback on steel and aluminium tariffs, even if partial, would benefit Indian steel exporters and could ease bilateral trade tensions, complementing the recent interim trade deal framework.
Key Facts & Data
- Current US tariffs on steel and aluminium: up to 50% (raised from 25% and 10% respectively)
- Original Section 232 tariffs (March 2018): 25% steel, 10% aluminium
- US businesses and consumers bore ~90% of tariff costs (CBO and NY Fed studies)
- Section 232 legal basis: Trade Expansion Act of 1962
- India-US reciprocal tariff reduced to 18% (from 25%) under February 2026 interim deal
- Last use of Section 232 before 2018: 1986