Donald Trump<\/a>, last week slapped a 50% tariff on more than half of India\u2019s \u00a365bn worth of merchandise exports to the country\u2019s largest market. A supply chain once prized for being cheap suddenly became among the priciest.<\/p>\nThe scale of the hit is sobering. Christopher Wood, the global head of equity strategy at the investment bank Jefferies, puts the economic blow at \u00a341bn-\u00a345bn, singling out textiles, footwear, jewellery and gems, all of which are highly labour-intensive, as \u201cthe most negatively impacted\u201d.<\/p>\n
The pain is visible in Tirupur, Tamil Nadu\u2019s booming textile hub. \u201cWe\u2019re scared of losing our jobs. Many of us borrowed money to come here. If the factories cut workers, we will have nothing,\u201d Harihar Pradhan, a 32-year-old migrant worker from Odisha told the Times of India.<\/p>\n
Tirupur\u2019s half a million workers churn out cotton T-shirts, tracksuits and undergarments. They are shipped worldwide, but Americans have always been the biggest customers. Factories in Tirupur, as well as Noida in Uttar Pradesh, near Delhi, and Gujarat, are already shuttering production lines, according to the Federation of Indian Export Organisations (FIEO).<\/p>\n
Alongside textiles, India\u2019s gems, jewellery and seafood industries face the same tariffs: 50%, compared with 15-20% for competitors in Bangladesh, Sri Lanka, Vietnam and South Korea.<\/p>\n
Effective rates, once exemptions and existing duties are folded in, are even more punishing: 62% for ready-made garments, up from 12%, and 60% for shrimp, for example. \u201cThat\u2019s a massive competitive disadvantage,\u201d said Aurodeep Nandi, an economist at the Asian investment bank Nomura.<\/p>\n
Margins in these industries were razor-thin to begin with. The new tariffs could push them into loss-making territory, threatening factory closures, mass job losses and the unravelling of supply chains built over decades.<\/p>\n
Kirit Bhansali, the chair of the Gem and Jewellery Export Promotion Council, warned of \u201cdevastation\u201d. The US \u201cis our single largest market, accounting for over $10bn [\u00a37.4bn] in exports \u2013 nearly 30% of our industry\u2019s total global trade,\u201d he said. \u201cA blanket tariff of this magnitude will inflate costs, delay shipments, distort pricing and place immense pressure on every part of the value chain. We fear exports to the US could fall by over 75%, impacting polished diamonds, jewellery and coloured gemstones alike.\u201d<\/p>\n
Indian exporters rushed shipments to the US in August to beat the fall of the tariff hammer. \u201cIf the tariffs stick even for just three to six months, I fear India will lose a major share of this [apparel and garment] business,\u201d said Pallab Banerjee, a senior executive at Pearl Global Industries, a leading garment manufacturing firm. A Jaipur exporter added: \u201cGlobal buyers are highly price-sensitive. Even a 5% tariff difference can turn away buyers.\u201d<\/p>\n
Pearl Global can shift orders to factories abroad. But most Indian firms lack that luxury.<\/p>\n
The stakes for India\u2019s government are political as well as economic. The prime minister, Narendra Modi, has pitched manufacturing as a way to provide jobs to the millions of young Indians who join the labour force each year. These industries employ tens of millions, directly and indirectly.<\/p>\n
The tariffs pose a direct threat to that pledge, says Adil Kotwal of the Seepz Gems and Jewellery Manufacturers\u2019 Association. \u201cWe will see tens of thousands of skilled workers displaced across the country, in Surat, Jaipur, Mumbai and beyond. And once those jobs are lost, the damage will be hard to reverse,\u201d he said.<\/p>\n
The economic ripple effects spread quickly: fewer tiffin meals get ordered; smaller earnings for drivers and delivery staff, and weaker sales for local vendors.<\/p>\n
Across other industries, shrimp farming alone supports more than 16 million Indians. Two-thirds of the sector\u2019s \u00a35.5bn in exports go to the US. A Kolkata exporter said: \u201cWith the tariffs, India\u2019s shrimp will become super-expensive in the US market. We\u2019re already facing huge competition from Ecuador, as it has only a 15% tariff.\u201d Leather exporters, too, are bracing for tough times. The US buys a fifth of India\u2019s leather goods, from shoes to handbags.<\/p>\n
Trump has long called India a \u201ctariff king\u201d and accused Delhi of shutting the US out of the domestic market. But officials hoped Modi\u2019s personal rapport with Trump, and India\u2019s role as a strategic bulwark against China, might earn leniency. In July, Trump announced a 25% tariff, painful but seen as survivable. A month later, Trump doubled the levy, citing India\u2019s purchases of discounted Russian oil<\/a> that he argued were funding Russia\u2019s war against Ukraine.<\/p>\nA key reason for the draconian tariff hike, though, according to a New York Times report, was Trump\u2019s anger at Delhi dismissing his claims of brokering peace in the fierce four-day May conflict between arch-foes India and Pakistan.<\/p>\n
Many Indian exporters had expected tariffs of 10-15%, low enough to keep themselves in play as a seller to the US. Instead, they are finding themselves priced out.<\/p>\n
The economic growth fallout could be steep. Economists reckon the tariffs could shave up to one percentage point off India\u2019s GDP this year. The country\u2019s surprisingly strong 7.8% first-quarter expansion may cushion the blow, but only partially. \u201cThe effective macro hit from the 50% tariff imposition will start to feed via exports and have a domino effect on employment, wages and private consumption,\u201d said Madhavi Arora, the chief economist at Emkay Global Financial Services.<\/p>\n
Industry groups are pressing for credit relief, export assistance and aggressive pursuit of trade deals with other countries. Government officials talk of diversifying towards Japan, South Korea and China, while launching a textile export drive targeting 40 countries.<\/p>\n
As SC Ralhan, the head of the FIEO trade body, put it: \u201cThe steps taken now will determine how effectively India withstands external shocks.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"India has long been one of the world\u2019s great garment houses, turning out everything from cheap T-shirts to…\n","protected":false},"author":3,"featured_media":202048,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[64,79,67,132,68],"class_list":{"0":"post-202047","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-united-states","11":"tag-unitedstates","12":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115151209999901919","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/202047","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=202047"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/202047\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/202048"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=202047"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=202047"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=202047"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}