Kolkata Exporters Welcome US Trade Agreement After Tariff-Induced Slump
Exporters in West Bengal have received a much-needed boost with back-to-back trade agreements with the European Union and United States, offering a ray of optimism after months of declining exports. This development comes at a crucial time for the region's industrial sector, which had been grappling with significant challenges in international markets.
The Tariff Impact on Bengal's Export Economy
The Bengal industry suffered a substantial blow over the past five months, experiencing a staggering Rs 3,000 crore to Rs 3,500 crore decline in exports to the United States. This downturn followed the imposition of a 50% tariff on Indian products by the US administration under former President Donald Trump. Before these penal and reciprocal tariffs were implemented, total exports from Bengal to the US used to be worth between Rs 17,500 crore and Rs 18,000 crore annually.
The breakdown of these exports reveals the diversity of Bengal's export portfolio:
- Engineering exports: Approximately Rs 8,000 crore
- Leather products: Around Rs 1,200 crore
- Shrimp and seafood: Roughly Rs 6,000 crore
- Gems and jewellery: About Rs 2,000 crore
- Garments: Between Rs 450 crore and Rs 500 crore
Sector-Specific Challenges and Employment Concerns
The 50% tariff dealt a severe blow to multiple export sectors, with engineering goods being hit the hardest, followed closely by leather and marine products. These industries together employed more than 8 lakh people, making the tariff imposition not just an economic issue but a significant employment concern as well.
Abhishek Poddar, Regional Chairman of the Federation of Indian Export Organisations (FIEO, ER), highlighted the critical situation: "Following the penal tariff, no new orders were coming in. While there was some growth in new markets like the UAE, China and the UK, that did not fully compensate for the US losses."
Between April and December of last year, exports of garments, leather goods, seafood and related sectors suffered a noticeable slowdown as many US buyers put their orders on hold following the tariff imposition. This situation posed a direct threat to the livelihood of nearly 8 lakh workers across garments, seafood processing, leather, gems and jewellery, and engineering sectors that predominantly depend on the US market.
The New Trade Agreement and Its Implications
Industrialists now express hope that the new US trade deal, which has placed India in the lowest tariff bracket of 18%, will help both Indian and Bengal export businesses grow over the next couple of years. Poddar emphasized that this lowering of US tariffs would hopefully spell a positive outcome for exporters in India and Bengal over the next two to three years.
The move provides timely relief to several key sectors:
- Textiles and apparel
- Gems and jewellery
- Engineering goods
- Leather products
- Seafood sectors
These sectors represent major employment generators and export drivers for Bengal. Poddar added that these labor-intensive industries form the backbone of Bengal's export ecosystem, making their recovery crucial for the region's economic health.
Industry Perspectives on the Recovery Path
Arun Garodia, immediate past president of EEPC (formerly Engineering Export Promotion Council), expressed optimism that the deal would boost engineering exports from Bengal. He noted that no new agreements were struck during the penal tariff regime, and while exports to the US continued under earlier agreements during that period, exporters sometimes had to book losses.
Poddar pointed out an additional advantage: "The new trade deal places India in a significantly better competitive position than other exporter nations, such as Bangladesh, Vietnam and China." This improved positioning could help Bengal exporters regain and potentially expand their market share in the coming years.
Rajarshee Banerjee, a board member of the national managing committee of the Seafood Exporters' Association of India, provided specific insight into the shrimp export sector, which virtually stopped due to the reciprocal and penal tariffs. While welcoming the new development, Banerjee cautioned: "This is a welcome move but we have to look at the fine print." His statement reflects the cautious optimism prevailing among exporters who have weathered significant challenges in recent months.
The industry's experience with alternative markets during the tariff period revealed both opportunities and limitations. While new markets such as the UAE, China and Europe did compensate for around 15% to 20% of the export deficit to the US, they could not fully replace the lost American business. This partial compensation highlighted the continued importance of the US market for Bengal's export-oriented industries.
