Trump's 50% tariff threatens India's manufacturing ambitions
For Farida, which supplies brands like Cole Haan and Clarks and depends on the U.S. for about 60% of its business, the impact was immediate. New orders stopped. The 10 billion rupee ($114 million) project froze.
"With 25% tariffs, you can still work, you can give some discount, negotiate with the buyer and make some adjustments in your profits,' Rafeeque Ahmed, the company's chairman, said in an interview. "At 50%, you don't have anything.'
Farida is hardly alone. Trump's move would give India the highest tariff rate in Asia, threatening a manufacturing sector that Prime Minister Narendra Modi has spent a decade trying to build to take on the likes of China. The "Make in India' campaign was supposed to lift manufacturing to 25% of the economy. Last year, it stood at just 13% — lower than the 16% in 2015, according to World Bank data.
The last few years did offer glimmers of the future Modi had envisioned. Apple Inc. scaled up iPhone assembly in India, making the country the second-largest smartphone producer after China. Pharmaceuticals and green tech have also gained ground. The U.S. — whose policies and actions accelerated companies' adoption of a "China Plus One' strategy to diversify supply chains — is now India's biggest export market and one of its top sources of foreign investment.
That progress is suddenly vulnerable. While the tariff hike spares smartphones and pharmaceuticals for now, it puts the rest of India's $87 billion in U.S.-bound exports on the line.
"Forget China Plus One right now. Companies are thinking India Plus One,' Ahmed said. "They are making plans to move out of India.'
U.S. President Donald Trump and Indian Prime Minister Narendra Modi shake hands as they attend a joint press conference at the White House in Washington on February 13. |
REUTERS
India's Ministry of Commerce and Industry didn't immediately respond to a request for comment.
Trump says the tariff hike is punishment for India's purchase of discounted oil from Russia, which he argues helps fund President Vladimir Putin's war on Ukraine. But India was the only major economy to be hit with such "secondary tariffs,' even though China is the largest overall buyer of Moscow's crude.
If the 50% rate holds, Bloomberg Economics estimates U.S.-bound exports from India could fall by 60% and put nearly 1% of gross domestic product at risk. Without exemptions for pharmaceuticals and electronics, the decline could reach 80%. Even the earlier 25% rate — already higher than in Vietnam, Malaysia or Bangladesh, was enough to threaten a 30% drop in exports. For comparison, Chinese goods face about a 30% U.S. tariff.
"In addition to the economic challenge, politically it's difficult for Prime Minister Modi that India now pays a higher blanket rate than China,' said Alexander Slater, head of the India practice at consulting firm Capstone.
China is pressing on other fronts as well. Beijing wants to limit tech transfers and equipment exports to India and Southeast Asia, aiming to deter companies from relocating production, Bloomberg previously reported. China's rare earth curbs also hit Indian automakers earlier this year.
At the same time, Trump's tariffs have opened the door for closer India-China ties. Direct flights may resume as soon as next month, and Beijing has eased restrictions on urea exports to India. The two sides are discussing resuming border trade of locally made goods after more than five years, Bloomberg reported on Thursday.
An employee applies lacquer on a wedding ring for rhodium plating at the manufacturing unit of Creations Gems & Jewellery in Mumbai on April 9. |
AFP-JIJI
On the factory floor, anxiety over the U.S. tariff is palpable. Ajay Sahai, chief executive officer of the Federation of Indian Export Organizations, said exporters could see demand fall 20% in the short term. The timing couldn't be worse: summer 2026 orders are being placed right now, but with tariffs sitting at 50%, buyers are balking.
"I've been getting 80 to 90 calls every day concerning these issues from exporters seeking solutions and ways out,' he said. "It's difficult to do business in such a tariff environment.'
Some factories are slashing prices to hold on to customers. The only way to retain buyers is by giving huge discounts, said Sudhir Sekhri, managing director at apparel maker Trend Setters Group. Spring and summer orders account for roughly 65% of his firm's revenue.
In Mumbai, Sharad Kumar Saraf, managing director of Technocraft Group, which produces scaffolding, textiles and other goods, is running the numbers to reduce costs for buyers. About a third of its sales are headed for the U.S.. "Additional tariffs is unwarranted and uncalled for and will impact our trade severely,' he said.
There's still the possibility for a reprieve. U.S. and Indian officials are continuing trade talks, with the hopes of landing the first tranche of a bilateral trade deal this fall that could dial back tariffs. Trump will also meet Putin in Alaska this week to discuss Ukraine — any breakthrough there could strengthen the case for dropping America's oil-related levies.
But time is not on India's side. The longer the uncertainty drags on, the more companies will start looking elsewhere. India's share in many of these product categories is small and U.S. brands can shift their supply chains quickly if they decide to, said P Senthilkumar, partner at Vector Consulting Group.
The tariff threat feels personal for Farida Group, whose shoe plants employ about 23,000 people, with over half producing for the U.S.. Every paused shipment or canceled order brings painful choices — whether to halt or slow production, or let go of staff who have spent years honing their craft.
"You can't take business decisions in such uncertainty,' said Ahmed. "What will happen to workers? Shall I send them back? They have been with me for years, they are skilled workers, I can't just send them back.'
"Workers would be one of the biggest sufferers,' he added.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Japan Times
an hour ago
- Japan Times
On anniversary of WWII's end, China urges Japan to make the 'right choice'
Chinese Foreign Minister Wang Yi urged Japan to "make the right choice" and learn from history on Friday, the 80th anniversary of the end of World War II. "Only by facing history squarely can respect be earned; only by drawing lessons from history can a better future be explored; only by remembering the past can straying onto the wrong path again be avoided. We urge Japan to make the right choice." the official Xinhua News Agency quoted Wang as saying. Wang, who is also a member of the Political Bureau of the Communist Party of China's Central Committee, made the remarks at a news conference following his meeting with foreign ministers from Mekong River states, according to the Chinese Foreign Ministry. International documents such as the Potsdam Declaration clearly defined Japan's responsibility for the war and required it to return territories including Taiwan to China, Wang said. However, some in Japan are attempting to glorify its invasion and distort history, he said, calling such actions a challenge to the postwar international order. Also on Friday, Liu Jinsong, director-general of the Chinese ministry's Department of Asian Affairs, summoned Akira Yokochi, the No. 2 official at the Japanese Embassy in Beijing, and protested against visits to Tokyo's Yasukuni Shrine by Cabinet ministers of the administration of Japanese Prime Minister Shigeru Ishiba and others on the day, which marked the 80th anniversary of Japan's surrender in WWII. Yokochi explained Japan's position to Liu, according to the embassy. The Chinese Embassy in Tokyo also criticized the Yasukuni visits by the Japanese officials. The visits showed a wrong attitude toward the history of invasion, the embassy said, urging Japan to be prudent in speech and action over history issues and break away from militarism. Agriculture minister Shinjiro Koizumi, Finance Minister Katsunobu Kato and other Japanese politicians on Friday visited the Shinto shrine, which honors Class-A war criminals along with the war dead and is therefore regarded as a symbol of Japan's past militarism by neighboring countries such as China and South Korea. Ishiba offered a ritual offering to Yasukuni Shrine while refraining from paying a visit. On Friday, a spokesperson at South Korea's Foreign Ministry in a statement expressed "deep disappointment and regret" at visits and ritual offerings to the shrine by "responsible leaders of Japan," while stopping short of referring to the Japanese leaders by name. The South Korean government "strongly urges the leaders of Japan to squarely face history and demonstrate through action their humble reflection and sincere remorse for" the country's past history, and "stresses that this is an important foundation for the development of future-oriented relations between the two countries based on mutual trust," the statement said. Meanwhile, an official at the South Korean ministry took note of the fact that Ishiba used the word "remorse" over WWII in an address at an annual memorial ceremony held in Tokyo on Friday for those who died in the war. He thus became the first sitting Japanese prime minister to use the term at the war-end anniversary event since 2012. South Korean media scrambled to report this. Yonhap News Agency reported that Japan's prime minister used "remorse" in an address at the war-end anniversary ceremony for the first time in 13 years, but added that this was not direct remorse over Japan's wartime colonial rule.
Japan Times
3 hours ago
- Japan Times
Listed Japan firms log 11% quarterly profit drop
Publicly traded companies in Japan logged an 11.7% decrease in combined net profit for April-June from a year before as tariffs imposed by U.S. President Donald Trump weighed heavily on automakers. A tally by SMBC Nikko Securities showed that 1,143 firms in the Topix stock price index posted a combined net profit of ¥12,740.2 billion in the fiscal first quarter. Transportation machinery makers saw a 42.1% decrease in net profit. Nissan Motor and Mazda Motor swung to losses, while Toyota Motor marked a double-digit profit decline. Electricity and city gas suppliers were also in the red, affected by Tokyo Electric Power Company Holdings, which booked huge charges related to the decommissioning of nuclear reactors. Information and telecommunications service operators posted a 72.9% profit increase thanks to SoftBank Group, which had strong performance in its investment operations. Insurance firms reported a 35.8% profit rise. For the full year ending in March 2026, publicly traded companies are expected to post a 7.5% decrease in net profit, to ¥49,891 billion, the first decline in six years. Hikaru Yasuda, chief equity strategist at SMBC Nikko, said that attention should be paid to how well companies can absorb tariff impacts by passing on costs to customers or cutting costs.
Japan Times
3 hours ago
- Japan Times
Taliban mark fourth year in power in Afghanistan
Afghanistan's Taliban authorities marked the fourth anniversary of their takeover on Friday buoyed by Russia's first official recognition of their government, a step they hope other countries will follow. Helicopters circled above Kabul, dropping flower petals over the city to mark the Taliban seizure of the capital on Aug. 15, 2021. Taliban members and supporters leaned out of trucks and rickshaws on the streets below waving the black-and-white "Islamic Emirate of Afghanistan" flags. They also carried yellow jerry cans — a common receptacle for homemade bombs during the 20-year war against U.S.-led forces. Celebrations were organized across the country, although a military parade like the one held with much fanfare last year at the Bagram airbase, once the linchpin for U.S.-led operations, was canceled without public explanation. A gathering was held instead at the enormous Loya Jirga Hall in Kabul, where hundreds of men listened to ministers praise the government's achievements. Supreme Leader Hibatullah Akhundzada, who remains largely secluded in the southern Taliban heartland of Kandahar, did not attend but, in a statement read by a spokesman, hailed the return of security to Afghanistan. "Our people were saved from corruption, oppression, usurpation, narcotics, theft, plunder and looting in the light of Islamic laws," the statement said. "A positive environment was created for the rebuilding and reconstruction of Afghanistan." The speeches did not mention the steep challenges facing a country gripped by one of the world's worst humanitarian crises, according to the United Nations. In Jalalabad in the east, farmer Zabihullah — who like many Afghans only uses one name — celebrated the Taliban takeover but also hoped authorities would address poverty and unemployment. "They should address the bad situation in the country, because of unemployment poor Afghans are going from one country to another, some die, some are detained, it is a chaotic situation," the 45-year-old said. The Taliban government remains largely isolated on the global stage over restrictions imposed under their severe interpretation of Islamic law, with women facing restrictions the U.N. has deemed "gender apartheid." The International Criminal Court issued arrest warrants in July for two senior Taliban leaders, accusing them of crimes against humanity over the persecution of women and girls who are banned from most education and work. Women and girls are also barred from parks and gyms, and from traveling without a male guardian. The Taliban authorities scored a victory in July when Russia became the first country to officially recognize their administration. Kabul also enjoys close ties with China, Qatar and several Central Asian states. The Taliban government has reported talks in Kabul with officials from Western states, including Norway, Britain and the United States. International Crisis Group analyst Ibraheem Bahiss said women's rights are still important to the international community but other issues, particularly security, take precedence. "Even Europe — because it has a core interest with migration — has continued to pursue engagement," he said, although discussions with Taliban authorities on women's rights were "a complete nonstarter." The Taliban authorities have almost no internal opposition but struggle with economic fragility, international aid cuts and the influx of 4 million Afghans expelled from neighboring countries. The Revolutionary Association of the Women of Afghanistan (RAWA) condemned any engagement with the Taliban authorities in a statement. Contrary to its claims, RAWA said, the Taliban government "is not dedicated to ensuring peace and human dignity but is bent on destroying the last vestiges of our people's most basic rights." Independent experts appointed by the U.N. Human Rights Council called on the international community on Thursday not to normalize relations with the Taliban authorities and to reject their "violent and authoritarian rule." "Operating without legitimacy, the Taliban enforces an institutionalized system of gender oppression, crushes dissent, exacts reprisals, and muzzles independent media," they said in a statement.
