Trump tariffs: Exporters on edge, fear losing orders

NEW DELHI: Businesses are staring at a significant loss of orders during the upcoming festival season as Donald Trump's additional tariffs of 50% on Indian exports to the US makes it unviable to compete with products from rival countries.

For them, the only hope is a breakthrough when Indian and American trade negotiators finish their talks in the last week of Aug.While smartphones, pharmaceuticals, and petrol, diesel and jet fuel using non-Russian oil are exempt from the tariffs notified from Aug 21, around 55% of Indian exports will be covered by the latest US action. Sectors, such as machine-made small jewellery will simply become unviable, given the low value addition and the resultant low margins.Soon after Trump's executive order, some exporters were on the phone with their American buyers, trying to assess the damage.

"The 50% reciprocal tariff effectively imposes a cost burden, placing our exporters at a 30-35 percentage point competitive disadvantage compared to peers from countries with lesser reciprocal tariff... many export orders have already been put on hold as buyers reassess sourcing decisions in light of higher landed costs.

For a large number of MSME-led sectors, absorbing this sudden cost escalation is simply not viable," said Fieo president S C Ralhan.The massive gap in levies means that orders for a large part of garments will move from India to Bangladesh and Sri Lanka. Similarly, Pakistan will gain in case of some bed linen. "US buyers may shift orders to countries like Vietnam, Bangladesh, and China. It remains to be seen how things unfold in the next few weeks, how our BTA negotiations progress when the US team visits India for the sixth round of talks.

Till that time, it is a wait and watch situation," said AEPC secretary general Mithileshwar Thakur.If the US imposes tariffs in line with Wednesday's announcements, in sectors such as non-leather footwear - which means products such as sports shoes and athleisure - companies looking to tie up with Indian suppliers to cater to the domestic and international markets will review their plans.Amid the rush to seek govt support, there were some sensible voices too.

"Govt cannot offer the kind of support that will be required to offset the impact of the US tariffs, it will be illogical to even suggest that. It is good that we are engaged. If something good works out during this 21-day window it is very good, otherwise exporters will have to focus on market diversification," said Fieo director general Ajai Sahay.While some of India's trade agreements with the European Free Trade Association are going to come into effect from Oct, the one signed recently with the UK is around a year away from implementation. Even if the treaty with the EU is signed by the year-end, its ratification and rollout will take time.Besides, diversification is not going to be easy either as China is increasing its focus on European and other markets, hoping to hedge its bets, amid twists and turns in Trump's trade policy.