When U.S. President Donald Trump announced retaliatory tariffs on April 2, the 26% tariff on India came as unexpected to many Indian exporters.
Of the total merchandise exports from India in 2023-2024, close to 18% of the shipments were to the U.S. and a substantial portion of these are made in MSME clusters such as Coimbatore and Tiruppur.
The retaliatory tariff led to anxiety and uncertainty among both U.S. buyers and Indian suppliers and discussions commenced on prices, new suppliers, cancellation of orders, etc. The 90-day pause has given some respite and hope, though the risks of unpredictability continue.
BKS Textiles, which is located almost 45 km from Coimbatore city, sells bed spreads, pillow covers, napkins, etc., to a dozen buyers in the U.S.
Its managing firector M. Senthil Kumar says orders started slowing down for almost three months, anticipating the tariff.
“The U.S. buyers thought it [the tariff] will not harm India. But the 27% announcement came as a twist. One of the customers immediately wanted to shift the sourcing to Turkey that had a lesser tariff. Then, the U.S. President announced a 10% baseline tariff. Though there is no request for price cut now or shifting of orders, the threat is still there.”
Executive director of KPR Mill C.R. Anandakrishnan said that while the urgent shipments had gone, the others were on hold for want of clarity. For instance, the existing duty varies for crew neck and collar neck t-shirts. “We do not know whether it is 10% in addition to these tariffs.” Further, one of the buyers has asked for sharing of the additional cost, he said.
According to V. Elangovan, managing director of SNQS International in Tiruppur, there are garment buyers who are shifting orders from China to India. But, they are asking for the goods at the Chinese prices, which is 10% to 15% lesser and rushing of shipments within 90 days.
Ajoy Thipaiah, proprietor of Kerehaklu Estate in Karnataka, which ships two-three containers of specialty coffee to the U.S., said, “We have a tie up with a roaster who is a distributor in the U.S. Every season, when the harvest starts, we reach a price agreement.” “When the retaliatory tariff was announced, there was dilemma and the distributor said he cannot take the full burden. Now, the rate is reduced to 10% and we will ship the entire quantity in the 90 days,” he added.
In some cases, the tariffs are bringing in new orders. Alphacraft, an aluminium smelting foundry and machine shop in Coimbatore, has four customers in the U.S. Ramesh Muthuramalingam, its managing director, said, “We were paying 2.5 % duty and competing with China. Two months ago, we lost an order from an U.S. buyer to China. On Thursday, the buyer shifted the order from China to our factory. We are investing in capex and it will continue. If the Indian government is able to manage the current situation effectively, India will get more orders,” he said.
Rajesh Doraiswamy, joint managing director at Salzer Electronics, which employs 1,500 workers at its factories, said, “We seem to be stepping back to the pre-globalisation times.”
However, there are reasons for gains for Indian exporters in the medium to long term. Labour cost constitutes 14-15% of the product (that are made by Salzer) price when made in India. This will be almost 40% if the electrical and engineering items are made in the U.S. So, there is very little chance of production moving to the U.S., he said.
The exporters added that the disturbances to the financial markets and potential slowdown in demand in the U.S. after the 90-day pause period were additional risks. Further, import of Chinese goods may increase in India. The government should consider all these factors and come out with measures to protect the Indian exporters and attract investments, they said.
Published – April 12, 2025 08:30 pm IST
