Online Reporter
Indian exporters who built their businesses on Americans’ demand for affordable goods are redrawing their strategies and weighing alternatives to reduce the pain from US President Donald Trump’s shock 50 percent levy on imports.
Trump’s decision to double tariffs in the space of a week will make India-made apparel to generic drugs prohibitively expensive and can heavily disrupt exports, if not bring them to a grinding halt for many smaller businesses.
“This is worse than Covid-19 for us,” said Lalit Thukral, founder of apparel exporter Twenty Second Miles, who fears the industry will have to sell his goods at a loss and compares the tariff-led disruption to the coronavirus pandemic.
“At least, there seemed to be an end to it. This tariff situation is just getting worse.”
While escalating tariffs pose an existential threat to small enterprises like Twenty Second Miles, the larger ones are considering coping tactics, including relocating production lines to countries with a lower tariff barrier, tapping buyers in other geographies and exploring acquisitions in the US.
Gokaldas Exports, one of India’s largest apparel exporters that earns about 70 percent of its revenue from the US, plans to ramp up production in its factories in Kenya and Ethiopia, which face just a 10 percent US levy.
“Africa is looking like a good source at the moment,” Gokaldas’ Managing Director Sivaramakrishnan Ganapathi said in an interview. “We are seeing a huge amount of inquiries for production from that region from American customers.”
The mitigating strategies will be a gut punch for Prime Minister Narendra Modi’s flagship ‘Make in India’ initiative and puncture any prospects to position India as an alternative manufacturing hotspot to China. Economists forecast that Trump tariffs could clip India’s gross domestic product by as much as 1 percent. — Bloomberg
