WITH US consumers pushing for reductions and, normally, putting orders on maintain following President Donald Trump’s announcement of reciprocal tariffs, Indian exporters are learnt to have approached the federal government for aid, looking for further fund allocations, decrease rates of interest on loans, and enlargement of export credit score insurance coverage to cowl even pending deliveries, in a bid to retain their foothold within the US market.
Whereas the ten per cent baseline tariffs for all international locations got here into impact from April 5, the 26 per cent reciprocal tariffs imposed on India kick in on Wednesday.
Indicating that decrease reciprocal tariffs might not be an absolute benefit, exporters expressed concern about rising opponents — reminiscent of Kenya for tea exports, Japan and South Korea for equipment, Ecuador for marine merchandise and Turkey for attire — who could achieve floor because of an obligation benefit within the US market. These international locations usually are not conventional rivals, however could now eat into India’s share, exporters stated.
Though reciprocal tariffs on Indian items are decrease as in comparison with a number of manufacturing-centric international locations, many exporters are going through uncertainty as contracts are set to be renegotiated. US consumers are pushing for an obligation pass-through, which may end in a further 13 per cent responsibility burden on Indian merchandise — doubtlessly wreaking havoc on low-margin exports like attire and marine items.
“All orders to the US are on maintain as contemporary calculations on the influence of the responsibility must be achieved. Patrons and sellers could renegotiate the contract and share the responsibility. Because the reciprocal tariff on India is 26 per cent, the burden will seemingly be cut up between the 2. However the issue is that a number of merchandise — reminiscent of attire, leather-based and marine items — have low margins and should not be capable to take in the price,” stated Ajay Sahai, Director Basic and CEO of the Federation of Indian Export Organisations (FIEO).
In the meantime, assume tank World Commerce Analysis Initiative (GTRI) has projected that India may see a decline of $5.76 billion, or 6.41 per cent, in exports to the US in 2025. Based on official US information, India exported items value $89.81 billion to the US in FY24. The assume tank estimated that exports of fish and crustaceans could fall by 20 per cent, iron or metal articles by 18 per cent, and diamonds, gold, and associated merchandise by 15.3 per cent.
“Car and components exports are projected to drop by 12.1 per cent, whereas electrical, telecom and digital merchandise could decline by 12 per cent. Different classes reminiscent of plastics and articles thereof (-9.4 per cent), carpets (-6.3 per cent), petroleum merchandise (-5.2 per cent), natural chemical substances (-2.2 per cent) and equipment (-2.0 per cent) are additionally anticipated to be negatively impacted,” it stated.
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Sahai stated exporters would require authorities help within the type of curiosity equalisation and the Remission of Duties and Taxes on Exported Merchandise (RoDTEP) scheme to tide over the state of affairs, no less than till India indicators a Bilateral Commerce Settlement (BTA) with the US. Exporters are banking on the BTA to safe tariff aid.
“Within the quick time period, there will probably be points. However in the long run, India has the responsibility benefit, uncooked supplies and aggressive wages to ship orders. Nevertheless, we’ve sought help from the federal government for the close to time period,” stated Rajendra Kumar Jalan, Chairman of the Council for Leather-based Exports (CLE).
GTRI stated India exported $457.7 million value of footwear to the US in 2024, with the US accounting for 18.3 per cent of India’s world footwear exports. Earlier subjected to a mean tariff of 8.8 per cent underneath Most Favoured Nation (MFN) phrases, Indian merchandise will now face 43.5 per cent responsibility, it stated.
“Regardless of the rise, India is anticipated to see a modest rise in exports, because of its aggressive edge over prime suppliers like China, Vietnam, and Indonesia. India at present holds a small 1.61 per cent share of the US market, however exports are projected to develop by 3.1 per cent, or about $14.2 million,” GTRI stated.
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Attire exporters stated that orders have been placed on maintain, however not cancelled but. Nevertheless, the trade is anxious concerning the prospect of a decline in demand and the potential for selective aid being prolonged to international locations like Bangladesh and Cambodia.
“Prospects are looking for reductions, and new orders are, by and enormous, on maintain. There’s a long-term benefit for India within the US attire market, given the tariff differential it now enjoys vis-à-vis main apparel-exporting international locations like China, Bangladesh, Vietnam and Cambodia. Nevertheless, within the quick time period, the trade wants aid. Now we have requested the federal government to create a market diversification fund, in addition to a devoted export promotion fund, to facilitate simpler market entry to the US,” stated Mithileshwar Thakur, Secretary Basic of the Attire Export Promotion Council (AEPC).
Thakur additional recommended tweaking the present PLI scheme for textiles by reducing the funding threshold and increasing the product basket, amongst different measures, to spur and stimulate funding for capability augmentation.
GTRI additionally famous that India’s clothes and made-up exports to the US continued to develop in 2024, at the same time as US tariffs surged. The US purchased $2.52 billion value of India’s non-knitted attire final yr — round 31 per cent of India’s world exports on this class.
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Though tariffs jumped from 10.3 per cent to 46.6 per cent, Indian exports to the US are nonetheless anticipated to develop by 2.1 per cent, or about $52.9 million, aided by decrease prices and a shift in sourcing away from international locations like China and Vietnam, the assume tank stated.