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Coping with 50% tariffs :

August 22, 2025
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India’s labor-intensive export sectors, including textiles, diamonds and seafood are bracing for a major shock as an additional 25% U.S. tariff on Indian goods is set to take effect on August 27. All eyes are on August 27 when US President Donald Trump’s secondary sanctions of 25%—besides the 25% reciprocal tariffs already in effect from August 7—on Indian goods for importing Russian oil will kick in. Despite the peace talks in Alaska between Trump and his Russian counterpart Vladimir Putin to end the 42-month-long conflict between Moscow and Kyiv, Russia still has not committed to bilateral talks with Ukraine. For such reasons, the pressure of secondary sanctions might remain. On Friday, Peter Navarro, the White House counsellor for trade and manufacturing, called India “Maharaja of tariffs” and “a laundromat for the Kremlin” by purchasing discounted Russian crude oil, refining it and selling the products at a premium globally. India’s External Affairs Minister, S Jaishankar reiterated the country’s stance in Moscow that India is perplexed by the logic of the US’s decision to impose additional 25% tariffs as it was the previous Biden administration that wanted India to buy such oil to stabilise world energy markets. Once the 50% tariffs come into effect, this is likely to adversely impact the country’s labour-intensive exports to the US worth almost $50 billion, according to analysts.

Devastating blow to India’s export hubs:
There is no doubt that such punitive tariffs would have devastating consequences for textile and apparel exporters from Tiruppur and Ludhiana, shrimp farmers in Andhra Pradesh, diamond cutters from Gujarat and carpet weavers in Bhadohi in Uttar Pradesh. According to FE’s ground reports on how these towns are coping with the tariff shock, the relentless rhythm of looms and whirring of spindles in Tiruppur has been replaced by an uneasy silence as orders are being cancelled for small apparel manufacturers. So, too, for textile units in Ludhiana as their US shipments are on hold. Nearly 30% of such units have an exposure to the US market. The seafood sector has also been caught off-guard as the US accounts for 35% of exports. Shrimp is India’s largest export with Andhra contributing 60% of such shipments. Diamond cutters in Surat face a grim scenario as stocks of rough diamonds with the companies can sustain employment for only a month and half, maybe till Diwali. Carpet making in Uttar Pradesh is big business as 98% of the product is shipped overseas. With 50% tariffs, a lot of people are likely to be idle.

A call for immediate Government intervention:
On a priority basis, the need is for strong policy support to enable these businesses to cope with Trump’s tariff disruption. The Government must channel more budgetary resources to the affected micro, small and medium enterprises (MSMEs), besides appropriate export promotion and trade diversification measures. Trade diversification through free trade agreements (FTAs) with many countries is an efficacious response but it will take time to work out. The requirement is for immediate financial support as MSMEs employ thousands of workers in these industrial towns. The ground reports indicate a despondent mood reminiscent of the Covid-19 lockdown when all activity ground to a halt. There is considerable merit in demands from industry players that the Government provide Covid-era measures like loan moratoriums and ad hoc 30% working capital support, expand the non-performing asset classification period to 180 days from 90 and reinstate the interest equalisation scheme that was scrapped last December, among several other measures. These will definitely help the labour-intensive export industries cope with 50% tariffs till such time alternative markets through FTAs are found for their merchandise shipments.

Source : https://www.financialexpress.com/opinion/coping-with-50-tariffs/3955000/

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