U.S. Rejects India’s Consultation Requests—Again!

By Dhairya Shah

Introduction

The U.S. has rejected India’s request for WTO (World Trade Organization) consultations on June 10, arguing that its 25% auto tariffs fall under the Article XXI national security exception rather than safeguard measures.

Impact on Both Nations

The rejection strains India–U.S. ties and complicates the roles of institutions like the WTO. For India, this means blockage of the route of a multilateral agreement between both nations involving India, the U.S. and WTO, and a need to address the tariffs through some other route like bilateral trade talks or retaliatory tariffs. This underscores the U.S.’s longstanding history of rejecting consultations, often citing national security measures at international platforms such as the WTO. The rejection also sheds light on the limited role of WTO in resolving disputes involving such exceptions.

Key Elements

• India initiated the WTO process on June 3 after the U.S. imposed tariffs on vehicles and auto parts on May 3, claiming duties operate as de facto safeguards requiring multilateral oversight.
  
  

• New Delhi has reserved the right to impose retaliatory tariffs on select U.S. products in response to American levies on steel, aluminium, and auto components.
  
  

• India’s auto parts export faces significant exposure, with $2.2 billion of components shipped to the U.S. in 2024, representing nearly 30% of India’s exports of auto parts.
  
  

• Washington has rejected India’s request for consultations at the WTO multiple times previously. For example, the U.S. has rejected India’s request for consultations over tariffs on steel and aluminium, citing similar national security grounds. India exported a whopping $4.56 billion in FY24–25 to the U.S. in steel, aluminium and aluminium parts. The doubling of tariffs led to the Indian Steel Association warning of a drop of 85% in steel exports.
  
  

Results and Impact

GTRI (Global Trade Research Initiative) chief Ajay Srivastava commented on the U.S.’s auto tariffs and their impact on India. He said that although the auto tariffs would have little to no impact on India’s expanding car export industry—since the exports to the U.S. were only $8.9 million, which is a fraction of total auto exports—he cautioned India against reducing tariffs on passenger car imports to appease the U.S., citing the collapse of the Australian auto-manufacturing industry in the 1980s due to slashing tariffs.

Thus, this rejection would impact India–U.S. trade ties, potentially invite retaliatory tariffs, negatively impact the auto components industry of India which is largely U.S.-dependent, disrupt global supply chains, and affect global demand-supply as Indian manufacturers try to push their product in other markets due to high tariffs.

Dhairya Shah is a first-year undergraduate student at Ashoka University, majoring in Economics and Public Policy. Through prior research internships, he has developed a strong foundation in policy analysis and a keen interest in evidence-based solutions. He is eager to contribute to the think tank’s work with analytical rigor and a collaborative mindset, aiming to help generate insights that create tangible social and economic impact.