Indian Exporters Navigate Turbulent US Tariff Landscape
NEW DELHI: The US tariff regime for Indian goods experienced dramatic volatility over a weekend, leaving exporters grappling with uncertainty. A leading exporter departed work on Friday facing additional US tariffs of 25% on most Indian products, hopeful for a reduction to 18% in the coming week. However, late Friday evening brought a seismic shift when the US Supreme Court declared the imposition of reciprocal tariffs illegal.
By Saturday, a new tariff levy of 10% was implemented, which then escalated to 15% by evening. This rapid sequence of changes has left Indian businesses exhausted and preparing for further instability.
Exporters Describe 'New Normal' of Policy Inconsistency
"Indian exporters were on tenterhooks for the last three quarters as we were offering very heavy discounts to retain US business," revealed Pallab Banerjee, Managing Director of Pearl Global, a prominent garment manufacturer. "We knew our government was working on a bilateral trade deal. The US economy's resilience is the only help that mitigated these effects, but one thing is very clear: inconsistency in US tariff policies is the new normal for now."
Over the past ten months, businesses have witnessed multiple tariff adjustments, with most preparing for additional twists and turns as current tariffs remain in place for 150 days. The industry has largely accepted that unpredictable policies have become standard operating procedure.
Discount Strategies and Business Adaptation
Most exporters express satisfaction with uniform tariffs over Most Favored Nation (MFN) or product-specific rates. Having previously managed discounts of 15-18% when former President Trump imposed 50% levies on India, businesses have developed resilience to discount pressures.
When punitive tariffs of 50% were active against Indian exports, discounts ranged from 15-18%. Following the trade deal announcement on February 2, these discounts decreased to 0-3%. Currently, many exporters anticipate US buyers will request a three-way split, potentially requiring discounts up to 5%.
"The 10% tariffs were good; we were all smiling, but then it changed within a few hours," commented HKL Magu, Managing Director of Jyoti Apparels and an industry veteran. "This is temporary. We will get to know what happens when offices open in the US on Monday."
Operational Challenges and Industry Perspectives
Banerjee elaborated on the practical difficulties: "The frequent tariff changes impact businesses, particularly retailers and brands, who will continuously need to recalibrate their cost calculations and negotiate or renegotiate with suppliers."
Footwear industry representatives view the level-playing field as beneficial for Indian businesses. "It is good. Coming from a higher duty to lower will not make much difference," stated Israr Ahmed, Director at Farida Group, a major leather and footwear exporter.
Aqueel Panaruna, Chairman of Florence Shoe Company, added: "Recent clarity provided by the US Supreme Court ruling has improved visibility for global footwear and leather sourcing, with effective duties now expected to fall in the 10-15% range, a more favourable outcome than earlier. The ruling applies uniformly across Asian sourcing countries, helping restore predictability for US brands."
The China Factor in Global Trade Dynamics
The significant beneficiary of the US Supreme Court ruling appears to be China. Previously facing additional tariffs exceeding 30% on most products, China will now pay less than half that rate. Tariff-wise, Chinese exports will achieve parity with competitors, potentially reshaping global sourcing patterns and competitive landscapes.
This development adds another layer of complexity for Indian exporters, who must now compete not only with tariff uncertainties but also with a major trading rival that has gained substantial tariff advantages through the same legal ruling.
