India has proposed zero-percent tariffs on auto parts and steel to the United States, on the condition that the U.S. offers the same rates. Negotiations between the two nations on tariffs and trade show progress, suggesting potential mutual benefits from such an agreement.

There is uncertainty about the feasibility of this deal, especially since the U.S. imposes 25% tariffs on Canadian steel. The challenge lies in whether the U.S. can offer India zero tariffs while keeping higher tariffs on Canada.

Anticipation in Market Trends

As discussions progress, stakeholders must wait for the exact terms of any proposed agreement. There is anticipation around a potential shift back to lower tariff structures in recent market trends.

To understand what’s already happened: India has made an offer to eliminate tariffs on auto parts and steel when trading with the United States, but only if the U.S. agrees to do the same. In plain terms, India is saying, “We’ll drop our charges if you drop yours.” At first glance, this might seem like a mutually easy fix—but the situation is more complicated beneath the surface.

Washington currently applies a very high 25% tariff on Canadian steel. That sends a message: the U.S. isn’t quick to offer the same treatment across the board. So, if Washington were to accept India’s proposal, it would draw a sharp contrast with how it’s dealing with a close neighbour. Such inconsistency could cause political and economic ripples.

That said, forward movement in talks suggests that both Delhi and Washington see something to gain. There’s a good chance they’re feeling out where the pain points are, testing the limits of flexibility without committing prematurely. What we might be witnessing is the beginning of a narrower, more customised trade agreement—tailored in a way that sidesteps the broader tensions normally linked to trade policy.

Market Reactions and Trade Strategies

For short-term futures and options traders working in industries tied to metals and manufacturing, the low-tariff proposal adds a layer of timing speculation. The possibility of cheaper steel movement between India and the U.S. introduces the chance of thinner margins for domestic producers, and by extension, changes in contract demand expectations. If you’re watching price spreads in these areas, it’s how traders react to these signals—not just the tariffs themselves—that could set the tone over the coming weeks.

One of the main uncertainties right now is how fast anything materialises. These are not overnight deals. Policy changes like this rarely move past the discussion stage without public comments, industry analysis, and new legislative procedures in both countries. That leaves quite a wide gap between “idea” and “execution.”

Still, it’s worth noting that lower tariffs—if they come—could pull market interest away from high inventory hedging strategies. This may increase short-term volatility as pricing adjusts not just on the physical side, but in the timing of expected deliveries for industrial buyers. For those of us tracking calendar spreads in the metals space, this environment calls for precision. Traders may consider reducing duration risk and keeping exposure tightly tied to front-month movements.

Policy-driven adjustments also tend to draw sharp reactions from larger institutions—many of which shift positioning quickly when trade agreements touch raw materials. This could skew volume into single contract months or distort open interest across expiry curves. In that setting, what we’ve often relied on for trend confirmation—like volume consolidation or contango/narrowing backwardation—might behave differently than usual.

The pricing of credit futures linked to trade-sensitive producers might need a fresh look. Some names, particularly those leveraged through North American distribution routes, could see spreads widen slightly as investors weigh tariff risk relative to import penetration.

As traders, this leaves little room for complacency. High-impact policy changes, even in draft form, deserve closer scrutiny. For now, keeping position sizes modest while trading directional bets with short durations seems like the more sensible approach. This isn’t the place for long-tailed exposure. Until clearer word comes from Washington, we’ll stay ready to revise our assumptions, but not rush toward bets built on unfounded optimism.

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