Facing a critical season of shipments, a prominent Indian leather goods exporter is embarking on trips to Europe and America to secure future orders, even as the industry grapples with punishing tariffs in its key US market.
Discounts and Squeezed Margins to Stay Competitive
The exporter, with a significant reliance on American buyers, is currently offering discounts of around 20%. This drastic measure comes as US importers have themselves reduced their margins by 7-8% to help Indian products compete. The root cause is a stark tariff disparity: goods from India face a 50% duty upon entering the US, compared to just 15-20% for rival sourcing countries.
"The buyers know that we cannot sustain this as this is more than the profit that we make. These are tough times to keep the order book up," revealed the exporter. This sentiment is echoed across the sector, with several Indian garment and footwear companies choosing to shoulder part of the additional cost burden. Their hope is to survive the next few months until a long-pending trade deal between India and the US is finalized.
Uncertainty Looms as Buyers Explore Alternatives
With no clear timeline on the trade agreement and US President Donald Trump continuing his tough tariff rhetoric, anxiety is mounting about orders for the upcoming season. An industry executive confirmed that some American buyers are actively evaluating India against other comparable markets. "If the deal is done then they will stick with the Indian seller, otherwise some of them may shift," the executive stated.
This potential shift poses a severe threat to employment, as veteran industry observers note that leather and textiles are both highly employment-intensive sectors that would be worst hit by a loss of orders.
EU Market Offers Hope, But US Scale is Unmatched
On a more positive note, Indian exporters are looking towards a potential free trade agreement with the European Union. However, even after negotiations are finalized, the ratification process could take several months.
Despite the challenges, the United States remains the focal market for most exporters due to the sheer volume of orders. One exporter highlighted the contrast: "You can expect to get an order for 500 pieces with 20 designs from one American buyer. In Europe, you will need 10 buyers and many more designs to reach that number."
Government officials have indicated that the Trump administration has reviewed what they term a "good offer" from India, but there has been no subsequent communication. This silence has plunged exporters into a fresh wave of uncertainty just as they prepare for the crucial spring-summer dispatch season and plan for the next.
