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Indian exporters work out 3-way deal with US buyers to beat Trump tariffs, expedite consignments
Textiles and clothing, gems and jewellery, shrimp, leather and footwear, chemicals and electrical and mechanical machinery would be most affected. Reuters
Several Indian exporters have worked out a three-way deal with their American partners to tackle 50 per cent tariffs imposed by US President Donald Trump.
Under the deal, Indian exporters and their American partners are splitting the burden of tariffs in three equal halves, according to The Times of India.
The arrangement, which began when Trump imposed the 10 per cent tariff in April, means that the Indian exporter will provide a discount amounting to one-third of the total increased cost of tariffs (7-8 per cent in case of 25 per cent tariffs), the American importer will cut its margin by the same percentage, and the rest of the increased cost will be passed on to customers, as per the newspaper.
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ALSO READ: Trump's 50% tariffs could drag Indian GDP growth below 6% — here's what analysts say
Trump on July 31 imposed 25 per cent tariff on India when he announced country-specific tariffs for more than 60 countries. He topped that with 25 per cent additional tariff on Wednesday for India's purchase of Russian oil, taking total tariffs to 50 per cent.
They are also frontloading exports and dispatching consignments before the kick-in of tariffs.
Even 3-way burden-sharing may not save exports from 50% tariffs: Exporters
Exporters are concerned that even the three-way split of tariffs' burden may not save themselves once 50 per cent tariffs kick in as some export-oriented, labour-intensive sectors like textiles run on low margins and tariffs will squeeze their margins further.
They said that 25 per cent could be tolerated but 50 per cent could cripple them.
The 25 per cent additional tariff —taking overall tariffs on India to 50 per cent— will kick in on August 27. For goods shipped before that date, the previous tariff rates will apply till Sept. 27.
Apparel Export Promotion Council (APEC) Chairman Sudhir Sekhri told ToI that 50 per cent tariffs are a 'huge setback' to the labour-intensive apparel export industry.
'There is no way industry can absorb this. I am sure the government also realises that this unreasonable increase in tariff will sound the death knell for the micro and medium apparel industry, especially those who majorly sell to the US market, unless govt steps in with direct fiscal support to the industry,' said Sekhri.
Separately, Tirupur Exporters' Association President Raja M Shanmugam sought an intervention from the government and argued that it is now no longer feasible to export to the United States due to the low margins.
For gems and jewellery too, the prognosis is not good, with companies predicting a steep fall in exports and bankers said that much of the exports are on credit and there is a risk of default, the newspaper reported.
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