New Delhi, Aug 27: The US’s 50 per cent tariffs on Indian goods came into effect on Wednesday, and it will impact exports and job creation in labour-intensive sectors such as shrimp, apparel, diamonds, leather and footwear, and gems and jewellery.
Exporters said the imposition of a 25 per cent penalty on India over and above the 25 per cent tariffs move will disrupt the flow of Indian goods to its largest export market.
The US accounted for about 20 per cent of India’s USD 437.42 billion worth of goods exports in 2024-25. The US is the largest trading partner of India from 2021-22.
In 2024-25, the bilateral trade in goods stood at USD 131.8 billion (USD 86.5 billion exports and USD 45.3 billion imports).
“The 50 per cent tariff is like an economic sanction. It would lead to closure of units and job cuts,” an exporter from the leather sector said.
An apparel exporter said the textiles sector, with exports of USD 10.3 billion, is one of the worst-impacted segments.
“The industry was reconciled to the 25 per cent reciprocal tariff announced by the USA, as it was prepared to absorb a part of the tariff increase. But the additional burden of another 25 per cent… has effectively driven the Indian apparel industry out of the US market as the gap of 30-31 per cent tariff disadvantage vis-a-vis major competing countries like Bangladesh, Vietnam, Sri Lanka, Cambodia and Indonesia is impossible to bridge,” the exporter said.
Gems and Jewellery Export Promotion Council (GJEPC) Chairman Kirit Bhansali has said there is a significant dependency on the US market.
“For cut and polished diamonds, half of India’s exports are US-bound. With this tariff hike, the entire industry may come to a standstill, placing immense pressure on every part of the value chain, from karigars (artisans) to large manufacturer,” he has said, adding that competing manufacturing hubs such as Turkiye, Vietnam, and Thailand continue to enjoy significantly, making Indian products relatively less competitive in the US market due to India’s 50 per cent tariff.
This imbalance, he said, if unaddressed, could erode India’s long-standing position as a key supplier to the US.
Another official from the diamond sector said diamond cutting and polishing, which sustains lakhs of jobs across Gujarat’s hinterland, especially Surat, Navsari, Bhavnagar, and Jasdan.
A Kolkata-based seafood exporter said now India’s shrimp will become “super” expensive in the US market, impacting competitiveness of exporters.
“We are already facing huge competition from Ecuador, as it has only a 15 per cent tariff. Indian shrimp already attracts a 2.49 per cent anti-dumping duty and a 5.77 per cent countervailing duty. After this 50 per cent, the duty will be significantly high,” the shrimp exporter said.
Similarly, a leather exporter said some of the companies have orders in hand for about 2-3 months, but the US firms are demanding about a 20 per cent discount to retain the orders.
“Considering the 50 per cent tariff for India, if the discount is not accepted, orders are kept fully on hold or cancelled. Also, if a discount is not given, no new orders will be placed,” the leather footwear exporter said, adding that firms doing business with the US anticipate a 50 per cent reduction/retrenchment in their workforce/ supervisors/ staff and management executives due to loss of US business.
Economic think tank GTRI said the US tariffs will hit 66 per cent of India’s USD 86.5 billion exports to America.
Exporters have urged the government to announce steps to deal with these high tariffs.
Federation of Indian Export Organisations (FIEO) President S C Ralhan has urged a moratorium on payment of principal and interest for loans up to a period of one year.
Additionally, automatic enhancement of the existing limit by 30 per cent, along with collateral-free lending on Emergency Credit Line Guarantee Scheme (ECLGS) lines may also be pushed as these will help in addressing the stress of these companies without much burden on the exchequer, he said.
Besides, expanding PLI schemes, enhancing infrastructure, and investing in cold-chain/storage assets to strengthen competitiveness and aggressive market diversification through accelerated trade agreements (FTAs) with the EU, Oman, Chile, Peru, GCC, Africa, and other Latin American countries, with a provision for early-harvest for labour-intensive sectors, should be prioritised.
FIEO appeals for swift, coordinated action among exporters, industry bodies, and government agencies to protect livelihoods, reinforce global trade links, and navigate this turbulent phase. (PTI)
