India+1? Tariffs Jolt Manufacturing Dreams

Trump's tariffs have spread panic among some US buyers—they have paused merchandise orders from India

- Megha Mandavia

A toy factory floor on the outskirts of Bengaluru is alive with motion and noise. Long rows of assembly lines hum steadily, carrying half-finished cars, dolls, and animal figurines from one station to the next. Workers in safety vests and blue, maroon, and black uniforms move quickly but with practiced rhythm.

Some workers spray plastic toy parts in various colours to meet stringent client requirements, while their colleagues fix wheels to trucks. Mountains of cartons are stacked at the edge of the factory floor, ready to be shipped to American buyers ahead of the holiday season. With Thanksgiving and Christmas around the corner, the third quarter is the busiest time of the year.

The sense of urgency and excitement on the factory floor contrasts with the gloom in the back office of Propelus Manufacturing, which is offering steep discounts to its American clientele after US President Donald Trump threatened a 50% tariff rate on imports from India.

"Our 2025 orders...the clients will take, but we have to cut rates. We have to support them. Only then they may come back. Clients are hunting for countries with the lowest tariff," said Anshu Arya, who set up this factory post-pandemic, spotting an opportunity in the US pivot from China's factory floor. "But our 2026 orders of $1.5 million have been halted."

25% tariffs are already in effect. Secondary sanctions, in the form of additional 25% tariffs for India's purchase of Russian oil, are set to kick in on 27 August. Trump may eventually decide against pressing ahead with the additional tariff, but it has already spooked buyers in the US. Even if withdrawn, the new diplomatic reality may make them more cautious about sourcing from India, especially as bilateral relations have soured—close ties with Washington were a key selling point for Indian manufacturers. And even at 25%, India's tariff would remain five percentage points higher than that of its closest competitor, Vietnam.