by Col Dr P K Vasudeva (Retd)

As and when the U.S. imposes safeguard measures or tariffs that negatively impact Indian exports, India can legally retaliate under the World Trade Organisation (WTO) framework—but it must follow specific rules and procedures. India can (and often does) challenge U.S. safeguard measures as these measures violate WTO rules.

If the WTO panel or Appellate Body rules in India's favour, India can request authorisation to impose retaliatory tariffs (also called suspension of concessions). Once India wins a dispute, it can impose tariffs on U.S. goods of equivalent value (to the harm caused by the U.S. measures). These tariffs are usually on politically or economically sensitive goods (e.g., agricultural or manufactured goods).

India imposed retaliatory tariffs on 28 U.S. products (like almonds, apples, and walnuts) in response to the U.S. tariffs on steel and aluminium in 2018. India can also choose to negotiate a settlement directly with the U.S. before or during a WTO dispute.

This may involve the U.S. offering exemptions or revising its safeguard measures. For instance, after extended talks in 2023, India agreed to drop some retaliatory tariffs after the U.S. removed certain tariffs and restored GSP (Generalized System of Preferences) benefits.

India has now formally notified the WTO of its plan to suspend trade concessions on certain US-origin products in response to Washington’s safeguard tariffs on Indian automobile parts, escalating trade tensions just days ahead of the anticipated announcement of a bilateral trade deal. These types of tariffs are usually temporary measures used by countries to protect domestic industries from a sudden surge in imports. India’s move suggests it believes these tariffs are unfair or violate WTO rules, and it is seeking resolution through the WTO’s dispute settlement mechanism.

In a notification dated 3 July to the WTO’s Council for Trade in Goods, India invoked Article 12.5 of the Agreement on Safeguards, stating its intention to impose retaliatory duties on select US products. According to this Article 12.5 a developing country Member shall not be required to provide compensation when applying a safeguard measure in accordance with the provisions of this Agreement. 

This Article 12.5 of the WTO Agreement on Safeguards allows a member country to notify its intention to suspend trade concessions if another member imposes safeguard measures without proper consultation. The move follows the United States’ decision to extend safeguard tariffs—amounting to a 25 per cent ad valorem increase—on imports of passenger vehicles, light trucks, and certain automobile components from India, effective from 3 May.

“The proposed suspension of concessions or other obligations would take the form of an increase in tariffs on selected products originating in the US,” stated by India’s WTO communication, noting that these retaliatory duties would match the impact of the US safeguard action. The estimated trade affected by the US action is valued at $2.9 billion, with India seeking to reciprocally recover $723.75 million annually through its proposed tariff measures.

A senior government official, on the condition of anonymity, said that India’s action was necessary to assert its WTO rights and prevent the normalisation of unilateral safeguard measures. This sends a clear message that India will not allow unfair trade actions to go unanswered, particularly when due process under the WTO framework is bypassed.

Earlier Washington had turned down India’s notice for WTO consultations on the US’s 25 per cent tariff on auto components, asserting that the auto duties were imposed on national security grounds and therefore are not subject to multilateral trade rules, as per a WTO paper.

According to the WTO document, India maintained that the US measures, which were imposed without prior notification to the WTO or the mandatory consultations under Article 12.3 of the Safeguards Agreement, are inconsistent with the global trade rules enshrined in the General Agreement on Tariffs and Trade (GATT) 1994 and the WTO’s safeguard provisions.

This Article 12.3 of the WTO Safeguards Agreement requires a country planning safeguard measures to consult affected members in advance, providing them an opportunity to discuss the proposed action and seek clarification.

While India has not yet specified the exact products or tariff rates, it has reserved the right to implement the retaliatory duties 30 days after the date of notification—effectively from 1st August. The government also retained the option to revise the product list and duty structure as needed, signalling flexibility in its retaliatory strategy, as per India’s WTO notice.

The timing of India’s notification is significant. It comes amid heightened expansions of a breakthrough in the ongoing India-US Bilateral Trade Agreement (BTA) negotiations, with both sides reportedly aiming for a first phase announcement. The move could be seen as an attempt by India to build negotiating leverage, especially as it pushes for the removal of safeguard duties as part of the final seal contours. Trade analysts say that India’s WTO notification is a legal and strategic step, signalling its readiness to retaliate against the US safeguard duties on automobiles and parts.

“By invoking Article 8.2 of the Safeguards Agreement, India is asserting its rights under international trade rules. The proposed retaliation—tariff hikes on US goods worth over $700 million—is proportionate to the injury caused,” said Ajay Srivastava, co-founder of the Global Trade Research Initiative, a trade research think tank.

“However, whether India will follow through remains uncertain. In a similar case involving US steel tariffs, India held back. Given the sensitive timing of the India-US trade deal and broader geopolitical considerations, this may be more of a warning shot than a guaranteed action,” said Srivastava.

The writer is author of World Trade Organisation: Implications for Indian Economy published by Pearson Education. He is former Professor ‘International Trade’.

The writer is a defence analyst, an author, researcher and former Professor ‘International Trade’. Views expressed above are the author's own