UPSC CURRENT AFFAIRS – 15 March 2025

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Steel Tariffs as a Tool in Trade Wars

The article explores the historical and contemporary significance of steel tariffs as a strategic tool in trade wars.
It traces the use of steel tariffs from 1816 to the Trump administration, highlighting their role in protecting domestic industries and addressing trade imbalances.

Steel tariffs have been a contentious issue in global trade, particularly under the Trump administration, which imposed tariffs on steel imports to protect US industries.
The topic is relevant for UPSC aspirants as it touches upon international trade, trade wars, and economic policies, making it important for GS Paper 2 (International Relations) and GS Paper 3 (Economy).

1816 Tariff:
- The Tariff of 1816 was one of the first protective tariffs in the US, aimed at shielding nascent industries, including steel, from foreign competition after the War of 1812.
20th Century Tariffs:
- Throughout the 20th century, steel tariffs were used by various countries to protect domestic industries during periods of economic turmoil, such as the Great Depression and post-World War II reconstruction.
Trump Administration (2018):
- In 2018, the Trump administration imposed 25% tariffs on steel imports under Section 232 of the Trade Expansion Act of 1962, citing national security concerns.

Protecting Domestic Industries:
- Steel tariffs are used to protect domestic steel producers from cheap imports, ensuring the survival of a strategically important industry.
National Security:
- Steel is a critical component for defense infrastructure, making its domestic production essential for national security.
Addressing Trade Imbalances:
- Tariffs are often imposed to reduce trade deficits by making imports more expensive and encouraging domestic production.
Political Tool:
- Steel tariffs can be used as a negotiating tool in trade discussions, leveraging economic pressure to achieve favorable terms.

Positive Impacts:
- Job Creation: Tariffs can protect jobs in the steel industry and related sectors.
- Industrial Growth: Encourages investment in domestic steel production and infrastructure.
Negative Impacts:
- Trade Retaliation: Other countries may impose retaliatory tariffs, leading to trade wars and reduced global trade.
- Higher Costs: Increased steel prices can raise costs for industries reliant on steel, such as automobiles and construction.
- Inflation: Higher production costs can lead to inflation, affecting the broader economy.

Retaliatory Measures:
- Countries like the European Union, China, and India imposed retaliatory tariffs on US goods in response to the 2018 steel tariffs.
WTO Disputes:
- Several countries challenged the US steel tariffs at the World Trade Organization (WTO), arguing that they violated international trade rules.
Bilateral Negotiations:
- The US used steel tariffs as leverage in bilateral trade negotiations, such as the USMCA (United States-Mexico-Canada Agreement).

Bilateral Negotiations & WTO Appeal – Engage in talks with the US for exemptions and dispute tariffs at the WTO.
Diversify Export Markets – Expand steel exports to EU, ASEAN, and Middle East to reduce reliance on the US.
Boost Domestic Demand – Increase steel use in infrastructure, railways, and defense projects.
Invest in High-Value Steel – Focus on specialty and alloy steel to stay competitive globally.
Strategic Counter-Tariffs – Impose targeted tariffs on US goods (agriculture, electronics, etc.) as leverage.
Lower Production Costs – Reduce raw material, logistics, and electricity costs to improve global competitiveness.

Steel tariffs have been a long-standing tool in trade policy, used to protect domestic industries, address trade imbalances, and serve as a negotiating tool in international trade.
While they offer short-term benefits for domestic industries, their long-term impact can lead to trade wars, higher costs, and global economic instability.