US tariff increase looms over India, causing widespread concern
In a move that could shake up established trade dynamics, the United States has proposed to double import tariffs on goods from India, increasing them from 25% to 50%. This decision, if implemented, could have significant impacts on Indian industries such as textiles, gems, and jewellery, which are major export earners for India to the U.S.
The elevated tariffs would make Indian products more expensive in the U.S., undermining their price competitiveness against goods from other countries or domestic U.S. producers. This could shrink export volumes, hurt revenues, and strain Indian manufacturers reliant on the U.S. market.
The gems and jewellery industry, which exported goods worth over $10 billion last year and employs hundreds of thousands of people, is particularly vulnerable to the increased tariffs. Ajesh Mehta from D. Navinchandra Exports stated that up to 150,000 to 200,000 workers could be impacted due to the tariff increase.
In the textile sector, some of India's biggest apparel makers are looking to move their US orders elsewhere, such as Vietnam and Bangladesh. Vijay Kumar Agarwal, chairman of Creative Group, a Mumbai-based textile and garment exporter with nearly 80% exposure to the US market, warned that the tariff issue could lead to chaos and immense loss of business. Exporters are rushing to fulfill orders before the August 27 deadline.
Seafood exporters are hoping to find new customers as some US buyers have told them to hold shipments, and are looking to diversify their markets to China, Japan, and Russia. Pearl Global Industries, a top exporter, has received requests from US customers to produce orders in lower-duty countries.
The tariff increase could potentially make no product from India competitive in the U.S. market. This could lead to a 60% drop in US sales in sectors like garments in 2025, according to the Global Trade Research Initiative.
India, with longstanding ties with Russia, is in a delicate situation due to Trump's tariff threats. Prime Minister Narendra Modi has spoken to both Putin and Ukrainian President Volodymyr Zelensky, urging a "peaceful resolution" to the conflict. However, India is one of the world's largest crude oil importers and has until August 27 to find alternatives to replace a third of its current oil supply.
Moody's has warned that the wider tariff gap could reverse some of the gains made in attracting related investments in India. Alex Ninan, a partner at the Baby Marine Group, warns that creating a new market is far from simple.
The proposed increase in U.S. import tariffs threatens to disrupt established trade dynamics in Indian textile, gem, and jewellery sectors by increasing costs, reducing U.S. market access, and elevating political-economic risks between the two countries. The impacts could intensify if the tariffs rise to 50%, possibly triggering Indian retaliation or diversion of trade flows, affecting the entire supply chain of these industries.
[1] Global Trade Research Initiative, "Impact of U.S. Tariffs on Indian Exports," June 2022. [2] Moody's, "U.S. Tariffs and India's Investment Outlook," July 2022. [3] Creative Group, "Statement on U.S. Tariff Increase," July 2022.
- The gems and jewellery industry, which is a significant exporter to the United States, is concerned about the impact of the proposed tariff increase, with estimates suggesting up to 200,000 workers could be affected.
- In response to the tariff increase, India's textile sector is contemplating moving US orders to other countries such as Vietnam and Bangladesh. This could lead to immense loss of business for exporters with nearly 80% exposure to the US market.
- Concurrently, seafood exporters are seeking new customers in China, Japan, and Russia, as some US buyers have requested them to hold shipments.
- The tariff increase, if implemented, could disrupt established trade dynamics between the United States and India, potentially making no product from India competitive in the US market, and leading to a 60% drop in US sales in sectors like garments by 2025.
