Indian exporters are in a state of panic as the US threatens to impose a steep 50% tariff on imports from India. The move, announced by President Donald Trump, aims to pressure New Delhi into cutting ties with Russia over its ongoing military actions in Ukraine. But for India’s export-driven sectors, the consequences could be devastating.
At a 50% tariff, Indian goods would lose their competitive edge in the US market. Economist Garima Kapoor from Elara Securities doesn’t mince words: “No product from India can stand any competitive edge” under such conditions. With India shipping $87 billion worth of goods to the US in 2024, the stakes are incredibly high.
The impact spans multiple industries. From textiles to seafood, gems to jewellery, businesses are bracing for a potential collapse in demand. The Global Trade Research Initiative predicts a staggering 60% drop in US sales for sectors like garments by 2025.
Exporters are scrambling to ship orders before the August 27 deadline. Vijay Kumar Agarwal of Creative Group, a Mumbai-based textile exporter heavily reliant on the US market, says they’re pushing out whatever they can. But he calls this mere “triage” – a temporary fix that doesn’t address the looming crisis.
The human cost could be severe. Agarwal employs 15,000 to 16,000 workers and worries about their future. “It is a very gloomy situation,” he admits. Across industries, hundreds of thousands of jobs hang in the balance.
Geopolitics complicates matters further. Prime Minister Narendra Modi has reached out to both Russian President Vladimir Putin and Ukraine’s Volodymyr Zelensky, urging peace. But with Trump set to meet Putin, the tariff decision remains entangled in global power plays.
Already, the fallout is visible. US buyers are putting new orders on hold, and some Indian manufacturers are shifting production to countries with lower tariffs. Pearl Global Industries, a major apparel exporter, reports customers requesting production in Vietnam or Bangladesh instead. Gokaldas Exports is eyeing expansion in Ethiopia and Kenya.
The gems and jewellery sector, which exported over $10 billion last year, faces particular vulnerability. Ajesh Mehta of D. Navinchandra Exports describes an industry at a standstill, with 150,000 to 200,000 jobs at risk. Luxury items simply can’t absorb such drastic tariff hikes.
Seafood exporters, too, are feeling the pinch. With US buyers delaying shipments, companies like Baby Marine Group are desperately seeking alternative markets in China, Japan, or even Russia. But as partner Alex Ninan points out, new markets don’t materialize overnight.
Moody’s recent warning adds to the unease. The credit rating agency suggests these tariffs could reverse India’s recent progress in attracting foreign investment. For a nation proud of its economic growth, the threat is both financial and reputational.
As the deadline approaches, Indian businesses face an uphill battle. The tariffs threaten to unravel years of trade progress, displace workers, and reshape entire industries. Whether diplomacy can avert this crisis remains uncertain, but one thing is clear: the clock is ticking.