Trump’s 50% tariffs loom: What steps is government looking at to cushion impact on key export sectors? Check details

As India faces the threat of 50% US tariffs from August 27, the government is looking at sector-specific measures to cushion impact on exporters and small and medium enterprises.

Indian goods exported to the US have been facing 25% tariffs from August 7, with an additional 25% penalty for India’s crude oil trade with Russia expected to be effective from August 27.These actions are vital due to the uncertainty surrounding the proposed bilateral trade agreement (BTA) negotiations. American trade negotiators have delayed their trip to Delhi for the sixth round of talks, initially set for August 25-29, despite both parties previously expressing their goal to finalize the first part of the BTA by autumn.The United States continues to be India's biggest trading partner. From April to July, India's exports to the US reached $33.53 billion, marking a 17.8% increase from $27.57 billion during the same period the previous year.Also Read | Trump’s 25% additional tariffs loom: Indian refiners delay orders for Russian crude oil; take cautious approach

How India is looking to counter impact of US tariffs

Officials have indicated that the government is considering targeted measures for specific industries instead of implementing a broad loan guarantee scheme to support export-oriented units and small and medium enterprises affected by US tariffs.

This decision follows requests from exporters for an emergency credit line guarantee scheme (ECLGS) that would provide collateral-free working capital and government-backed risk coverage to mitigate the impact of the tariffs on Indian exports.

“There have been cases where smaller firms, like in the textile sector, are not able to fully benefit from overarching schemes. That is why we are looking at targeted measures like sector-specific credit lines with relaxed collateral,” an official was quoted as saying.Additional measures under consideration include integrating lending infrastructure with the PM Vishwakarma scheme and the BharatNet project.Also Read | ‘Stop buying Russian crude oil’: Trump adviser says India should ‘start acting’ as strategic partner of US; ‘…it’s cozying up to Russia, China’The PM Vishwakarma scheme offers collateral-free credit and skill training to artisans and craftspeople, along with other support measures.BharatNet is among the largest rural telecom initiatives globally, aimed at delivering high-speed broadband access to gram panchayats nationwide."We are in discussions with banks and insurers about the potential to establish cluster-based working capital funds and reduce insurance premiums," the official stated.Also Read | GST rates to come down drastically! 99% of items in 12% bracket may move to 5%; here’s how you will benefitThe Federation of Indian Export Organisations (FIEO) has advocated for credit assistance, risk management, and cost reduction to handle the challenges posed by the significant 50% tariffs announced by the US. They have also recommended a one-year moratorium on loan repayments, as the high tariffs might lead to decreased orders or extended payment periods, putting pressure on exporters' cash flows.The commerce and industry ministry is communicating with exporters and export promotion councils to evaluate the effects of the existing 25% tariff. FIEO has recommended reducing insurance premiums to make them more affordable for small and medium-sized exporters. Additionally, they have advocated for an automatic increase in credit limits by up to 30%, as exporters might require more working capital to remain competitive with international competitors.Also Read | Trump sees a ‘dead economy’ - but US-based S&P Global upgrades India’s credit rating - here’s why