US rejects India’s WTO plea on auto tariffs after steel, aluminium dispute

India is looking to finalize the first tranche of the trade deal before US President Donald Trump’s 90-day pause on the US’s reciprocal tariff ends on 8 July, after which additional tariffs on Indian exports to the US could kick in in the absence of a trade agreement. But simultaneously, India has been ramping up efforts at the WTO to assert its rights.

Washington’s latest rejection of New Delhi’s case at the WTO mirrors its response to India’s challenge against the US’s steel and aluminium tariffs. Indian automobile exporters, particularly in the auto components and electric vehicle segments, fear restricted access to the US market just as they expand capacity to serve global supply chains.

The commerce ministry didn’t immediately reply to Mint’s queries.

The jurisdiction loophole

In response to India’s request for WTO consultations on 3 June, the US, in its submission to the WTO’s Committee on Safeguards on 10 June, firmly stated that its 25% ad valorem tariffs on imported passenger vehicles, light trucks, and auto components were issued under Section 232 of the US Trade Expansion Act of 1962. (Ad valorem tariffs are proportional to the estimated value of the products involved.)

The US added that as these tariffs fall under the essential security exception in Article XXI of the General Agreement on Tariffs and Trade (GATT) 1994 and are not safeguard measures, consultations under WTO’s Article 12.3 of the Safeguards Agreement do not apply.

“These actions are not safeguard measures," the US stated, adding that India’s request “has no basis in the Agreement on Safeguards".

“Nonetheless, we are open to discuss this or any other issue with India. Any discussions regarding the tariffs would not be under the Agreement on Safeguards and would be without prejudice to our view that the tariffs are not safeguard measures," the US added while rejecting India’s notice.

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India, however, has argued that these duties operate as de facto safeguard measures and require WTO oversight.

The tariff on auto components, which took effect on 3 May, followed a US announcement on 26 March and applies for an unlimited duration. New Delhi’s position is that such trade-restrictive measures should not bypass the multilateral framework merely by invoking national security.

Another Indian government official acknowledged the US position but said the impact on market access and predictability is undeniable. “Whether it’s called a safeguard or a security action, the consequence is the same—our exporters face a barrier," this official said, also speaking on condition of anonymity.

A matter of principle

Indian government officials argue that the dispute with the US over the auto tariffs has less to do with trade volume and is more about the principle of non-discrimination and the risks of unchecked protectionism.

Trade analysts added that the latest episodes involving India and the US also highlight the WTO’s limited role in disputes involving national security exceptions, and the growing trend among major economies to invoke such provisions to shield strategic industries.

India’s passenger car exports to the US in 2024 stood at just $8.9 million, according to commerce ministry data. This was a fraction of India’s total car exports that amounted to $6.98 billion last year, suggesting that the US’s new tariffs would have little to no effect on India’s expanding car export industry, said Ajay Srivastava, co-founder of the Global Trade Research Initiative (GTRI), a policy think tank.

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However, Srivastava cautioned that if India decides to reduce tariffs on passenger car imports to placate the US, it would be counterproductive. Srivastava drew reference to Australia’s experience in the late 1980s, when its automobile manufacturing industry collapsed after the country slashed its auto import tariff from 45% to 5%.

Last month, a US trade court declared Trump’s reciprocal tariffs as illegal, prompting calls from experts in India for New Delhi to reconsider its approach to the ongoing trade negotiations with Washington.

The impact of the US’s auto tariffs on India’s truck exports is also expected to be marginal. India exported $12.5 million worth of trucks to the US in 2024, accounting for only 0.89% of its global truck exports.

India’s auto parts sector, however, stands out as the most exposed category to the recent US tariffs, with India exporting $2.2 billion worth of components to the US in 2024, amounting to 29.1% of India’s global auto parts exports, as per commerce ministry data.