Workers in India express concerns over potential economic slump resulting from Trump's import taxes
In a move that could have far-reaching implications, the United States has imposed a 50% tariff on Indian goods, particularly gems and jewellery, textiles, automotive parts, and footwear. This decision poses a severe threat to Indian industries, potentially leading to massive job losses and making exports uncompetitive.
The Jewelry Sector Under Fire
The jewelry sector, heavily dependent on the US market, is at the forefront of this impact. With the US being the largest market, accounting for about $10-11 billion in exports (approximately 30% of global industry trade), the 50% tariff is a critical blow that could cripple many exporters and polishing units, especially small and medium-sized enterprises.
Industry leaders warn that this tariff hike, up from 10% to 50% in stages, will cause widespread job losses, possibly affecting over 100,000 workers, and severely reduce competitiveness against countries like Turkey, Vietnam, and Thailand with much lower tariffs. In response, the sector is planning to shift manufacturing to places like the UAE (tariffs around 10%) and Mexico (25%) and consider alternate supply chain routes to retain US market share legally.
Textiles and Automotive Sectors Feel the Heat
While the search results focus primarily on gems and jewellery, the overall impact of a 50% tariff by the US is expected to increase costs and reduce competitiveness in the US market for Indian textiles and automotive exports. This could lead to companies exploring alternate manufacturing bases or export routes with lower tariffs, potentially pushing Indian industries to diversify markets away from the US or increase domestic value addition to cushion tariff shocks.
Strategic Shifts and Market Diversification
In summary, the gems and jewellery industry is likely to see a strategic shift to low-tariff countries for manufacturing and exports, diversification of markets, and increased pressure to innovate or add value domestically to survive under the 50% US tariff regime. The textile and automotive sectors will likely follow a similar pattern of exploring geographic diversification and supply chain adjustments to mitigate the tariff impact.
The tariffs are due to take effect on August 27, leaving room for potential negotiations. However, the threat to jobs, revenues, and the global standing of Indian industries is palpable. For instance, in the textile city of Tiruppur in Tamil Nadu, India, about 30% of its exports go to the US, particularly in the cotton and knitwear segment, amounting to $5.1 billion in the last financial year. If exports contract in the coming months due to the tariffs, the textile industry in Tiruppur faces the risk of 100,000-200,000 job losses.
India is actively engaging in trade talks with the US to find diplomatic solutions and de-escalate trade tensions amid the row over Russian oil. The Indian government could provide relief to affected sectors, such as credit guarantees and loan moratoriums for small and medium enterprises. Additionally, India is encouraging its industries to diversify exports beyond the US by exploring new international alliances and trade deals.
Sources: [1] The Economic Times [2] The Hindu BusinessLine [3] Livemint [4] Business Standard [5] India Today
- The international trade politics between the United States and India has posed a severe threat to not only the jewelry sector, but also the textile and automotive sectors, as the 50% tariff imposed on Indian goods could make exports uncompetitive and lead to job losses.
- Amidst the escalating trade tensions, the government is actively seeking diplomatic solutions to de-escalate the situation, and is considering providing relief to affected sectors through measures such as credit guarantees and loan moratoriums for small and medium enterprises.
- To survive under the 50% US tariff regime, Indian industries may be forced to shift manufacturing to low-tariff countries, diversify markets, and innovate or add value domestically.
