Gujarat manufacturing sectors brace for impact as 50% tariff threat looms

Time of India

5 days ago

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Ahmedabad: As global trade tensions intensify, the spectre of steep 50% tariff on Indian exports by the US has cast a long shadow over Gujarat's manufacturing sector. Contributing a substantial chunk to India's industrial output, Gujarat's manufacturers could face significant disruptions across multiple industries, from textiles and chemicals to gems, ceramics, and engineering goods.
For Gujarat's exporters, the risk is not just about losing price competitiveness abroad but also about navigating uncertain supply chains and shifting buyer preferences.
Textiles: Value chain from yarn to garment under strain
Gujarat's textile belt, from Surat's man-made fabric hub to Ahmedabad's composite mills, stands among the most exposed to any steep tariff shock. The US is India's single-largest textile export market, taking $11 billion worth of shipments annually, about a quarter of India's total textile exports.
Of this, Gujarat accounts for roughly 35%.
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"A 50% tariff will wipe out exports," warns Rahul Shah, co-chairman, GCCI textile committee. "Everything from yarn to fabric shipments to the US is on hold. Even direct exporters are struggling, and the impact will snowball across the ecosystem, from mills to raw material suppliers and job work units."
"With textile companies in India operating on thin margins of 13–15% EBITDA (earnings before interest, taxes, depreciation, and amortization), there is little room for absorbing such shocks.
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Earlier tariff hikes of 10% triggered some renegotiations between buyers and suppliers, but the current 25% and proposed jump to 50% leaves no scope for compromise. If large exporters lose or pause orders, the repercussions will ripple across the entire value chain, including players who never directly ship to the US," Shah adds.
Bharat Chhajer, former chairman of Powerloom Development and Export Promotion Council (PDEXCIL), said, "There is no possibility to export to the US if the tariff is as high as 50%.
We have seen huge cancellations of orders in the past few days across the country for the US. Now, we will have to find new markets for our textile and garment industry. Third-country manufacturing will be required if there is no change in the 50% tariff policy by the US.
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Chemicals: Speciality exporters in the crosshairs
Gujarat's chemical clusters supply a vast spectrum of products ranging from dyes and pigments to high-value speciality intermediates to industries worldwide.
The US is India's single-largest market for chemical exports, and a steep tariff shock could deal a direct blow to the sector's competitiveness.
"Most chemicals cannot absorb such a high tariff," says Ankit Shah, chairman of northern region, Chemexcil. "At 50%, there is no scope for negotiation. Orders are already on hold, and the cascading slowdown in textile exports will spill over to domestic manufacturers too."
While commodity chemical players may still pivot to local demand, speciality chemical exporters face a far tougher road. Long product qualification cycles and high switching costs mean they cannot quickly replace lost business, and disrupted contracts could chip away at Gujarat's hard-won share in key markets like the US and Europe.
Gems & jewellery: Diamond polishing edge at risk
Surat's diamond cutting and polishing industry is a labour-oriented sector, which depends heavily on US demand.
A 25% tariff already impacted the industry's orders, which are on hold. A 50% duty could see orders rapidly diverted to rival hubs in Bangkok, Hong Kong, China, Thailand, or Indonesia.
"A majority of our exports are diamond-studded jewellery. If these markets become unviable, we will lose business to competitors abroad and need to urgently find new destinations for our exports. This will inevitably lead to job losses at home," says Haresh Acharya, director of India Bullion and Jewellers' Association (IBJA).
The sector is already grappling with subdued US demand and volatile natural diamond prices after the introduction of lab-grown diamonds. A new tariff wall could further shrink export pipelines, derail plans for expansion and upgradation.
Ceramics: Makers fear exports to US will stop
Gujarat is the ceramic hub of India, with Morbi emerging as a global supplier over the years. However, the industry fears if the tariffs reach 50%, other countries will capture the US market.
Kamlesh Patel, director of Indian Council of Ceramic Tiles and Sanitaryware (ICCTAS), said, "If tariffs reach 50%, our exports to the US will stop because other ceramic manufacturing countries like Spain and Italy have much lower tariffs compared to India.
Currently, tariffs are 25%, and due to that, distributors and dealers in the US have passed on the cost to buyers, but it is not being accepted in the market. The number of orders has decreased.
Ceramic and quartz exports to the US are around Rs 2,500-3,000 crore from India."
Food: Industry stares at difficult situation
Gujarat-based food industry is also worried about the tariff threats. Dhaval Raval, chairman of the Assocham food committee, said, "Some orders were cancelled following the 25% tariff. If it is increased to 50%, the situation will be worse. For Indian frozen food, there is little competition, but the prices for Indians living in the US will increase, affecting demand. There are significant order cancellations for spices players as well.
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