Tariff Tactic

The effects of US President Donald Trump’s imposition of a 50 per cent tariff on Indian goods have started to be felt on the country’s economy.

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Bad news has come from Tiruppur, the country’s knitwear capital, Coimbatore and Karur in Tamil Nadu which collectively employ over 1.25 million workers and export 745,000 crore worth of garments annually. The helplessness and anxieties shown by the garments exporters, who are feeling the heat of the 50 per cent tariff, are a pointer to the shape of things to come. They have said orders are being paused, redirected, or lost entirely to competitors in Bangladesh, Pakistan, Vietnam, and Cambodia, all of whom have lower US tariffs ranging between 19 per cent and 36 per cent. Information reaching the exporters indicate they need to brace for an unprecedented situation as buyers are asking them to absorb the tariff hike before thinking of sending their products to US markets. The revised duties, including baseline and remedy-linked tariffs, now push effective rates for some knitted garments to even 64 per cent. This means the same products exported by the Asian rivals will be available in US markets at rates 35 per cent less than Indian garments. It is feared that there will be a virtual de facto trade embargo.