Trump's 50% levy is forcing Indian banks to scrutinise exporters
Bloomberg News spoke to officials at five large Indian lenders who said they're assessing the financial ramifications of the punitive levies on their clients, especially those in the export-dependent textile, gem and jewellery sectors. They all spoke on the condition of anonymity, as the information is not public.
Lenders are asking borrowers more pointed questions when vetting new export financing proposals or renewals of such funding, the people said. They added that some export orders are being put on hold while trade negotiations play out between New Delhi and Washington.
The move comes after Trump doubled tariffs on India-made items in the space of a week, with the additional levy effective by Aug. 27, bringing the cumulative tariff to 50%. Businesses worry that this will severely disrupt shipments to the US by making Indian exports prohibitively expensive.
The industries hit hardest — they are also among the most labour-intensive — have asked the Narendra Modi-led government to introduce measures to reduce the pain from the new trade barriers.
Indian lenders are concerned the trade war will create new balance sheet stress and stoke painful memories of the country's distressed debt problem a few years back.
Some of their key queries, according to the people, pertain to cash flows, business continuity plans and burden-sharing efforts with other stakeholders such as distributors.
Some banks have begun to identify the most vulnerable clients internally by checking on financial parameters such as the percentage of revenue coming from the US, said two people Bloomberg News spoke to. The exposure to the highest-risk borrowers due to US levies isn't currently that worrisome, they added.
Most of the exporters these bankers have spoken to about the trade issue said they're hopeful for a partial rollback of the US tariffs.
Indian exporters have already started redrawing strategies to deal with the unexpected levies through measures such as expanding in other markets, shifting output from India to elsewhere and exploring acquisitions in the US.
Some cash-rich exporters can sustain losses for a year or two but they worry about longer-term loss of business to rivals in Bangladesh and Pakistan, a person said. These neighbouring nations face lower US levies than India.
India's Commerce Minister Piyush Goyal told Parliament late last month that the federal government is engaging with exporters to assess the impact of tariffs and will take 'all necessary steps to secure and advance our national interest.'
The Gem and Jewellery Export Promotion Council is seeking support such as finance relief and duty drawbacks.
Other requests include deferment of interest on working capital facilities by six months, 90-day pre-shipment and penalty-free loan payment extensions and a freeze on downward revisions of credit ratings, Kirit Bhansali, the trade group's chairman, said in an August 7 statement.
Rating companies haven't taken any action yet on exporters' creditworthiness. However, borrowing companies are worried and seeking government assistance to prevent any slip in ratings that will spike the cost of funding. Other Indian business representatives want to see more liquidity in the banking system to offset damage from the US tariffs.
India's government should push 'banks to lower the rate of interest' to keep businesses afloat, said Rahul Mehta, director at Mumbai-based Creative Garments Pvt. Removal of import duties on raw materials should also help, Mehta said, calling for a government response akin to Covid-era emergency policies.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Fashion Network
an hour ago
- Fashion Network
De Beers announces kimberlite field discovery in Angola
' joint venture in Angola has discovered a new kimberlite field, the most common source of mined diamonds, it said on Tuesday, its first such discovery in three decades. The Anglo American unit is jointly exploring for diamonds in Angola in partnership with the country's state-owned diamond company Endiama. De Beers said in a statement the joint venture had hit kimberlite in its first drill hole into a high-priority cluster of targets in July 2025. The company said further drilling, geophysical surveys and laboratory analysis will be conducted over the next few months to confirm the kimberlite type and assess its diamond potential. Kimberlites are a rare rock type that brings diamonds to the surface through volcanic eruptions. De Beers returned to Angola in 2022, having left a decade earlier after exploring unsuccessfully. The mining giant signed two mineral investment contracts with the government of Angola in April 2022, followed by agreements on diamond processing and exploration in 2024. Parent company Anglo American is divesting De Beers as part of its strategy to focus on its copper and iron ore assets. De Beers has drawn interest from at least six consortia, including commodities billionaire Anil Agarwal, Indian diamond firms, and Qatari investment funds, sources close to the companies told Reuters in June.
LeMonde
2 hours ago
- LeMonde
Trump says may allow lawsuit against Fed chair over renovations
President Donald Trump said Tuesday, August 12 he might allow "a major lawsuit against" the US central bank chief to proceed, as he complained again about renovations to the Federal Reserve headquarters and renewed pressure to lower interest rates. "The damage he has done by always being Too Late is incalculable," Trump wrote of Fed Chair Jerome Powell on his Truth Social platform. He added that he is thinking of allowing a lawsuit taking aim at Powell's oversight on the renovations in Washington, but did not offer more details. Trump has repeatedly lashed out at Powell this year over the Fed's decisions to keep interest rates steady since its last cut in December. Policymakers have been cautiously monitoring the effects of Trump's wide-ranging tariffs on the world's biggest economy, as they mulled the right time to lower rates further. This is because it takes time for levies to filter through to consumer prices. The jury is still out on whether Trump's latest tariffs will have a one-off or longer-term impact on inflation, but the president has regularly pointed to benign data to urge for rate reductions to boost the economy. Shortly after government data was released Tuesday, showing that consumer inflation stayed unchanged at 2.7% in July, Trump wrote on social media that Powell "must now lower the rate." He also called the Fed's leadership "complacent." Trump has openly floated the idea of ousting Powell over cost overruns for the renovation. While the US leader says the price of the makeover was $3.1 billion, reiterating this figure in his social media post on Tuesday, Powell has been quick to correct Trump in the past. The cost has been put at $2.5 billion, but Trump's higher number includes work on another building that Powell maintains was completed previously. On Tuesday, Trump said Powell was doing a "horrible" job in managing the Fed's revamp.
Euronews
3 hours ago
- Euronews
US inflation shows limited tariff impact, but prices still rise
US consumer prices rose 0.2% in July and 2.7% over the past year, coming in slightly below the expected tariff-induced spike. Core inflation hit 3.1% — its highest level since February — as shelter and service costs edged higher but tariff impacts remained modest. The figures suggest that slowing rent increases and cheaper gas are offsetting some impacts of US President Donald Trump's sweeping tariffs. Still, stubbornly high inflation puts the Federal Reserve in a difficult spot. Hiring slowed sharply in the spring, after Trump announced tariffs in April. Fed Chair Jerome Powell has warned that worsening inflation could pause rate cuts — a stance that has enraged Trump, who has defied traditional norms of central bank independence and demanded that the Federal Reserve lower borrowing costs. Gas prices fell 2.2% from June to July and have plunged 9.5% from a year earlier, the government's report said. Grocery prices slipped 0.1% last month, though they are still 2.2% higher than a year ago. Restaurant meals continued to get more expensive, however, rising 0.3% in July and 3.9% from a year earlier. Tariffs appeared to raise the cost of some imported items. Shoe prices jumped 1.4% from June to July, though they are still just 0.9% more expensive than a year ago. The cost of furniture leapt 0.9% in July and is 3.2% higher than a year earlier. Clothing prices ticked up 0.1% in July, after a larger rise in June, though they are still slightly cheaper than a year ago. Trouble for the government's chief inflation tracker Tuesday's data arrives at a highly-charged moment for the Labour Department's Bureau of Labour Statistics, which collects and publishes the inflation data. Trump fired Erika McEntarfer, then the head of BLS, after the 1 August jobs report also showed sharply lower hiring for May and June than had previously been reported. The president posted on social media Monday that he has picked E.J. Antoni, an economist at the conservative Heritage Foundation and a frequent critic of the jobs report, to replace McEntarfer. 'E.J. will ensure that the numbers released are honest and accurate,' Trump said on Truth Social. Adding to the BLS's turmoil is a government-wide hiring freeze that has forced it to cut back on the amount of data it collects for each inflation report, the agency has said. UBS economist Alan Detmeister estimates that BLS is now collecting about 18% fewer price quotes for the inflation report than it did a few months ago. He thinks the report will produce more volatile results, though averaged out over time, still reliable. Prices likely to rise later in the year as tariffs set in Americans are likely to absorb more trade-war costs in the coming months as Trump begins to finalise tariffs. Once businesses know what they will be paying, they are more likely to pass those costs to customers, economists say. Trump has insisted that overseas manufacturers will pay the tariffs by reducing their prices to offset the duties. Yet the pre-tariff prices of imports haven't fallen much since the levies were put in place. Economists at Goldman Sachs estimate that foreign manufacturers have absorbed just 14% of the duties through June, while 22% has been paid by consumers and 64% by US companies. Based on previous patterns, however — such as Trump's 2018 duties on washing machines — the economists expect that by this fall consumers will bear 67% of the burden, while foreign exporters pay 25% and US companies handle just 8%. Many large US companies are raising prices in response to the tariffs, including apparel makers Ralph Lauren and Under Armour, and eyewear company Warby Parker. Consumer products giant Procter & Gamble, maker of Crest toothpaste, Tide detergent and Charmin toilet paper, said late last month that it would lift prices on about a quarter of its products by mid-single-digit percentages. And cosmetics maker e.l.f. Beauty, which makes a majority of its products in China, said on Wednesday that it had raised prices by a dollar on its entire product assortment as of 1 August because of tariff costs, the third price hike in its 21-year history. 'We tend to lead and then we will see how many more kind of follow us,' CEO Tarang Amin said on an earnings call Wednesday. Matt Pavich, senior director of strategy and innovation at Revionics, a company that provides AI tools to large retailers to help them evaluate pricing decisions, says many companies are raising prices selectively to offset tariffs, rather than across the board. 'Up until now we haven't seen a massive hit to consumers in retail prices,' Pavich said. 'Now, they are going up, we've seen that.'
