Garments, jewellery, shrimp: India's core exports hit US tariff wall

India's vital garment and textile sectors, along with other labour-intensive industries, are facing a severe crisis as a new US tariff regime is projected to slash the country's exports by nearly 30% this fiscal year.

According to a report from the Global Trade Research Initiative (GTRI), a new 25% country-specific tariff, combined with an additional unspecified penalty, puts Indian exporters at a significant disadvantage compared to regional rivals. The think tank forecasts a sharp decline in Indian exports to the US—its largest trading partner—from $86.5 billion in FY2025 to around $60.6 billion in FY2026.

The brunt of the tariffs will be felt most acutely in sectors that are crucial for job creation and economic growth:

Garments and Textiles: India's garment exports are among the worst affected. The report highlights that knitted and woven garments, each valued at $2.7 billion in US exports, now face duties of 38.9% and 35.3%, respectively.

This is a dramatic increase that makes them far more expensive than goods from competitors like Vietnam, Bangladesh, and Cambodia. Made-up textiles, which include towels and bedsheets and bring in $3 billion in exports, are now subject to a 34% duty, giving rivals such as Pakistan and Vietnam a decisive pricing edge.

Jewellery: The country's $10 billion jewellery exports, which account for 40% of its global trade, now face a 27.1% duty. The report warns that with value addition in the sector averaging just 3-4%, these tariffs could make exports instantly unviable. Mechanical gold jewellery, a $3.6 billion segment, is expected to be hit the hardest.

Shrimp exports: India's $2 billion shrimp exports, a major component of the global seafood trade, will now face a 25% US tariff. This effectively eliminates India's competitive price advantage over countries like Canada and Chile, which benefit from free trade agreements with the US.

Engineering and metals: India’s $4.7 billion in metal exports, including steel and aluminum, and its engineering exports, such as $6.7 billion in machinery and $2.6 billion in auto parts, are also under pressure. The report states that tariffs over 26% make these products costlier than similar goods from Mexico, which has a 0% tariff, and Japan, which faces a 15% rate.

To help exporters weather the storm, GTRI has proposed a five-point action plan. The recommendations include reviving a financial relief scheme for MSMEs, creating a real-time trade intelligence helpdesk, and strategically leveraging free trade agreements.

The report underscores that the new tariffs are part of a broader shift toward protectionism in global trade, with markets like the EU also introducing new barriers like carbon taxes.

(Courtesy: www.5wh.com)