Trump tariffs: Indian exporters pin hope on 6th round of talks amid fear of losing orders

As the festival season approaches, Indian businesses are grappling with the looming threat of significant order losses due to new US tariffs on Indian exports.

President Donald Trump’s executive order, set to take effect on August 21, imposes a steep 50 per cent tariff on approximately 55 per cent of India’s exports to the United States.

This move has sparked concerns across multiple sectors, with many fearing they will struggle to compete with products from rival countries.

The tariffs spare certain industries, including smartphones, pharmaceuticals, and fuels like petrol, diesel, and jet fuel made from non-Russian oil. However, sectors such as machine-made small jewellery, which operate on low margins due to minimal value addition, are expected to be hit hard. For these businesses, the additional costs could render their products uncompetitive in the US market.

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In the wake of the announcement, Indian exporters have been in frantic discussions with their American buyers to gauge the impact, according to a Times of India report.

S.C. Ralhan, president of the Federation of Indian Export Organisations (FIEO), was quoted by the TOI as saying, “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.”

Exporters pin hope on sixth round of India-US talks

The tariff disparity is already shifting market dynamics. Garment orders, for instance, are likely to move from India to countries like Bangladesh and Sri Lanka, while Pakistan could gain an edge in bed linen exports.

Mithileshwar Thakur, secretary general of the Apparel Export Promotion Council (AEPC), noted, “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.”

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The non-leather footwear sector, including sports shoes and athleisure, is also under pressure. Companies planning to partner with Indian suppliers for domestic and international markets may reconsider their strategies if the tariffs are implemented as announced.

Amid the scramble for government support, some industry voices are urging pragmatism. Ajai Sahay, FIEO director general, cautioned against expecting a quick fix: “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.”

However, diversification poses its own challenges. While India’s trade agreements with the European Free Trade Association are set to take effect in October, the recently signed deal with the UK is still a year away from implementation. Even if a trade agreement with the European Union is finalised by year-end, ratification and rollout will take time. Meanwhile, China’s growing focus on European and other markets, as a hedge against US trade policy uncertainties, adds further complexity to India’s efforts to diversify.