Indian exporters worried as US tariff hike kicks in from Friday

New Delhi: The Federation of Indian Export Organisations (FIEO) on Thursday expressed grave concern over the US government’s imposition of an additional 25 per cent tariff on Indian-origin goods, raising total duties on many export categories up to 50 per cent, with effect from Friday.

FIEO President S.C. Ralhan described the development as a “setback”. He said that the duty hike can severely impact India’s exports to the US, with approximately 55 per cent of India’s US-bound shipments (worth $47–48 billion) are now exposed to pricing disadvantages of 30–35 per cent, rendering them uncompetitive in comparison to competitors from China, Vietnam, Cambodia, Philippines and other Southeast and South Asian countries.

Textiles and apparel manufacturers in Tiruppur (Tamil Nadu), Noida (UP), and Surat (Gujarat) have halted production amid worsening cost competitiveness. This sector is losing ground to lower-cost rivals from Vietnam and Bangladesh. While for seafood, especially shrimps, as the US market absorbs nearly 40 per cent of India’s marine exports, the tariff increase risks stockpile losses, disrupted supply chains, and growing farmer distress.

Ralhan said on other labour-intensive exports such as leather, ceramics, chemicals, handicrafts and carpets, the industry faces a sharp erosion of competitiveness, particularly against European, South East Asian, and Mexican producers. Delays, order cancellations, and negated cost advantages loom large for these sectors.

Looking at the current emerging scenario, the FIEO chief said there is a need for immediate government support, which includes a push for interest subvention schemes and export credit support to sustain working capital and liquidity. To further support this, low-cost and easy availability of credit with emphasis on MSMEs, with the support from banks and financial institutions, a special direction in this regard, from both the Government and the Reserve Bank of India, is needed, he added.

Ralhan also sought a moratorium on payment of principal and interest for loans up to a period of 1 year. Additionally, automatic enhancement of the existing limit by 30 per cent, along with collateral-free lending on ECLGS lines, may also be pushed as these will help in addressing the stress of these companies without much burden on the exchequer.

Besides, expanding PLI schemes, enhancing infrastructure, and investing in cold-chain storage assets to strengthen competitiveness and aggressive market diversification through accelerated trade agreements (FTAs) with the EU, Oman, Chile, Peru, the GCC, Africa, and other Latin American countries, with a provision for early-harvest for labour-intensive sectors, should be prioritised. However, leveraging a negotiating window for urgent diplomatic engagement with the US still remains the key, according to the FIEO statement.

IANS