Duty Dilemma: India Inc's American dream on hold as tariff talks drag

Time of India

6 days ago

Kolkata | Pune: Prolonged trade talks between India and the US are weighing on export orders, business plans, and onboarding new US clients for Indian businesses, as global companies and brands adopt a wait-and-watch mode on the outcome of the negotiations, said industry executives. The cautious stance is seen across major sectors such as electronics, apparel and textiles, seafood, gems and jewellery.
Electronics contract manufacturers like
Dixon Technologies
, Micromax-owned Bhagwati Products, and Karbonn Group said, while they are continuing exports to the US, clients have halted plans for new orders till they get clarity on the trade negotiations.
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"Prospective clients who wanted to manufacture in India for the US are in a wait-and-watch mode, expecting clarity on where India stands vis-a-vis China and Vietnam in terms of US tariff," said Atul Lall, managing director at Dixon Technologies. Dixon produces Motorola smartphones for exports to the US.
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Karbonn Group managing director Pardeep Jain noted prevailing high level of uncertainty regarding the US market. "Brands have made it clear that if there is no substantial duty difference between India and China, they are unlikely to shift manufacturing to India. Discussions are still continuing," he said.
India and the US are continuing discussions to finalise a
bilateral trade agreement
. The US government had earlier extended a 90-day pause on imposing reciprocal tariffs for most of its trading partners to August 1 from July 9. For India, the US has proposed a 26% tariff.
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US President Donald Trump on Wednesday said the deal with India could be soon finalised before reciprocal tariffs come into effect next month.
The US is India's largest trading partner with bilateral trade valued at $131.84 billion in FY25.
The current scenario is also impacting India's long-term export orders for gems and jewellery too, including for the Christmas and year-end shopping period.
"The process of placing orders for Christmas usually begins in June from the JCK Show of jewellery at Las Vegas; first with sample line orders followed by the full orders in September-October," said Sabyasachi Ray, executive director, The
Gems and Jewellery Export
Promotion Council. "This process has been disrupted as US importers are buying only for a short term for each month as there is no clarity on the exact rate of tariff."
US buyers are also doing rate negotiations, said Ray, adding that the buyers are expecting demand to fall if Indian jewellery becomes pricier due to higher tariffs. "Some buyers are negotiating about sharing the burden," he said.
Industry body
Confederation of Indian Textile Industry
(CITI) secretary general Chandrima Chatterjee said there is optimism in the short term that India will secure a good deal, with relative tariffs likely to be largely better than its major competitors.
"However, this optimism may not completely translate into orders in the medium term due to the vague scenario about applicable product specific tariffs that will unfold," she said. "There is cautious optimism. The buyers are holding back on big orders as the sectoral or category-wise tariff rates could vary significantly."
Seafood exporters too are facing slowdown in orders in the past few weeks as buyers are inquiring if the former is ready to absorb the entire burden of any increase in tariff. "There is a slowdown in exports from the past three weeks as new orders are not coming," said Pawan Kumar G, president, Seafood Exporters' Association of India.
Many marine sector exporters are also facing difficulty in obtaining loans as some banks are offering limited financing due to sluggish orders. The companies, which asked not to be named as it may affect their credit ratings, are seeking support from banks and the government to tide over the situation.
The US has imposed a 19% tariff on Indonesia under a new agreement, and 30% on the European Union effective August 1. Trump has sent tariff letters to about two dozen countries including Canada, Japan, and Brazil which specifies tariff rates ranging from 20% to 50% apart from a 50% tariff on copper. He has said for the smaller countries, it is likely to be around 10%.