Indian factory owners get midnight panic calls, told to hold orders or shift out of country as US tariff doubles

Since Donald Trump’s recent announcement of new tariffs on India, garment manufacturer Pearl Global — which counts US retailers like Gap and Kohl’s among its clients — has been fielding urgent late-night calls.

The message from American buyers has been blunt, either absorb the added tariff costs or shift production out of India.

Major US retailers, including Walmart, Amazon and Target have halted orders from India, reports NDTV.

In response, Pearl Global has sought to reassure its US partners by offering to relocate manufacturing to its facilities in Bangladesh, Indonesia, Vietnam, and Guatemala — all countries unaffected by the new US tariffs on Indian goods.

"All the customers are already calling me. They want us to ... shift from India to the other countries," Managing Director Pallab Banerjee told Reuters in an interview.

Trump's initial tariff proposals in April - which were lower for India than for the rival Asian garment hubs of Bangladesh, Vietnam and China - had been seen as an opportunity for India to rapidly expand in the $16 billion apparel exports market.

But the tables have turned as relations between New Delhi and Washington have soured, with India now facing a 50% tariff, versus 20% for Bangladesh and Vietnam, and 30% for China.

Pearl gets roughly half of its business from the United States. Some clients offered to continue taking products from India if it could share the tariff burden, but that is not viable, Banerjee said, without naming the customers.

'In the doldrums'

The 50% US tariff - comprising 25% that kicked in on Thursday and another 25% due to come into force on August 28 as a penalty for buying Russian oil - has stunned US garment buyers and their Indian suppliers, who say they are considering taking their manufacturing operations beyond Indian shores, even to less-established garment hubs like Ethiopia and Nepal.

Some exporters also say they have been asked by US clients to put orders on hold.

New Delhi has called Trump tariffs "extremely unfortunate".

India's garment sector was already grappling with a labour crunch and limited production capacity. But the prospect of exporters shifting production outside India would also be a blow to Prime Minister Narendra Modi's "Make in India" policy drive.

While Pearl can use its foreign factories to meet US orders, exporters that rely on domestic factories are set to be hit much harder.

RichaCo Exports has shipped $111 million of garments to the US this year, with clients such as J Crew Group, customs data shows. All were made in its more than two dozen factories across India. Around 95% of its annual Indian revenues come from the United States, said general manager Dinesh Raheja.

"We're exploring setting up a manufacturing base in (Nepal's capital) Kathmandu," he said. "The industry is in the doldrums."

Orders on hold

Earlier this week, India's biggest jeweller and watchmaker Titan told Reuters it was looking at shifting some manufacturing to the Middle East to maintain low-tariff access to US markets.

Amit Agarwal, finance chief of top Indian garment maker Raymond, said he was pinning hopes on the company's one factory in Ethiopia - which faces just a 10% US tariff and could possibly add more production lines within three months to cater to US clients.

The tariff threat comes as India was emerging as a big alternative for US garment buyers like Walmart, as Bangladesh faces a political crisis, and companies look to diversify supply chains beyond China.

Indian garment hub Tiruppur in the south, considered the country's knitwear capital and which accounts for nearly one-third of apparel exports, was bullish about the future earlier this year when Reuters visited and talked to exporters.

Panic has now descended on the hub

Some factories in Tiruppur have been asked by customers to hold orders, while some plan to ship as many goods as possible before the full 50% tariff kicks in, said Naveen Micheal John, executive director at Cotton Blossom India.

"An importer, which had placed orders for underwear, has come back saying that if you haven't purchased yarns ... keep it on hold for now," he said.

Some garments in Tiruppur cost US clients as little as $1, while a women's or men's T-shirt can vary from about $3.5-$5, which could soon face 50% tariffs, said N Thirukkumaran, general secretary of the Tiruppur ExportersF Association. With Reuters