Indian exporters are racing against the clock to beat the tariff uncertainty in the United States, with shipments to the world’s largest economy rising seven times faster than overall export growth in the April–July period.
Goods exports to the US jumped 21% to $33.5 billion, compared with a modest 3% growth in overall exports to $149.2 billion, according to the latest commerce department data. The surge is being attributed to frontloading of consignments by exporters anticipating higher duties under Donald Trump’s now-on, now-off tariff announcements.
The US currently accounts for 22% of India’s exports, leaving Indian shipments highly exposed to the prospect of a 50% duty, should Washington follow through with an additional 25% tariff from August 27.
Exporters, however, are treading cautiously. “We have spent the last week talking to buyers and in case of old buyers we are looking at some additional discount to retain the business even if it means that we have to pay out of our pockets for sometime,” said Sudhir Sekhri, chairman of the Apparel Export Promotion Council (AEPC).
Although negotiations with the US scheduled for August 25 have been postponed, industry players remain hopeful of a breakthrough. Exporters have so far managed to share the burden of the first 25% duty, even fast-tracking shipments to beat tariff deadlines. Some contracts, Sekhri added, now include a clause that discounts offered will lapse if secondary tariffs linked to India’s Russian oil imports do not materialise.
But sustaining business under a 50% duty remains a near-impossible task. “We operate on a very thin margin of 5–7%. Where is the question of offering steep discounts to offset the impact of 25% additional duty? We can sacrifice our profits but can’t sustain the business with losses,” said Rajendra Kumar Jalan, chairman of the Council for Leather Exports.
Industry bodies have swung into action. R.C. Ralhan, president of the Federation of Indian Export Organisations (FIEO), has convened a meeting of export promotion councils on Monday to draft a joint petition seeking government support. “There will be significant job losses if export orders are cancelled, especially in the MSME sector,” he warned.
Despite the cloud of uncertainty, July’s sectoral data suggests the US market has provided much-needed momentum. Gems and jewellery exports jumped 28% in July, reversing a 0.7% decline in April–July. Pharmaceuticals rose 14% in July, compared with 7.4% in the first four months, while engineering goods climbed 13.8% (versus 6%) and plastics 4.4% (against 2.6%).
“The US market has been expanding and Indian exporters have also focused on it as returns are good,” said Ajay Sahay, director general of FIEO. “Everybody was trying to frontload shipments. Order books were strong in April–May, and the China+1 sentiment boosted business. The sudden brakes, however, will result in deceleration,” added AEPC’s Sekhri.