The tariff restrictions by US President Donald Trump have posed new challenges to the Indian economic and business landscape. The recent tariff of 25% on steel and aluminum imports to strengthen its local producers and metal industry has led to certain drawbacks. The tariff restrictions have led to a downslide in the metal stocks listed on the stock market with the larger metal index falling more than 2%. The following article explores the negative effect of Trump’s tariff restrictions on Indian metal stocks and other drawbacks that the government and metal industry have to face:
1. Downturn in the price of metal stocks:
The restrictions on the import of metal from other countries like India and China in the US have led to a downfall in the demand for metals like steel and aluminum. Local producers like Tata Steel and Vedanta have been affected largely due to this restriction. Moreover, with less demand in the US, other producers of steel and aluminum all over the world are diverting their attention towards other markets like India. Thereby creating a market for cheap steel and aluminum imports. All these have affected steel and aluminium production and demand leading to a serious downturn in the stock prices. The Tata Steel Share price has fallen more than 4% after the declaration of tariffs by Trump in February.
On the other hand, Vedanta, another large steel and aluminium producer and exporter, has also witnessed a downfall in its stock price, demand and exports. The Vedanta share price fell by 4.47% to ₹435 making it one of most affected stocks that has been listed on the stock market. The Nifty Metal Index fell by more than 2% on a single day when the restrictions were imposed thereby leading to serious losses to metal producers and investors. The restrictions have created volatility in the market.
2. Low export and increase in cheap imports:
The restrictions have created a spiral wind for the Indian steel and aluminium producers where on one hand the metal exports have been reduced substantially thereby leading to losses. On the other hand, the imports from other countries engaged in steel and aluminium production have increased leading to increased competition. According to the latest data and Market insights, a 25% restriction can even lead to an almost 85% reduction in metal exports. Local production and its further sale.
3. Government Initiatives:
The government has taken steps to reduce the effect of Trump restrictions on steel and aluminium imports on the production and sales of steel and aluminium in India. A temporary 12% safeguard duty has been imposed to protect the local producers like Vedanta and Tata Steel from cheap imports. Even the technical analyst recommends buying on dips strategy for Vedanta and Tata Steel companies to ride out the market volatility.
Conclusion:
Despite the negative effect of Trump restrictions on metals, the Indian metal producers like Tata Steel and Vedanta are making necessary efforts to protect them with the assistance of the Steel Authority of India and Government of India. Investors are even recommended to not be discouraged with the recent downturn in stock prices and opt for buy on dips and long term investment strategy to protect oneself from any losses.
