Safeguarding employment in the face of a US tariff hike
Mapping the most affected sectors: To better prepare for the implications of higher tariffs, particularly for the employment scenario in India, it is crucial to identify the products that will be most impacted by the additional tariffs – both in terms of production volume and the number of workers employed in these sectors. This analysis should be complemented by an evaluation of whether the surplus output from these sectors can be absorbed either through trade-diversification or within the domestic economy to arrive at a realistic assessment of the impact on India's manufacturing, exports, employment, and GDP.
Currently, the proposed 50 percent additional tariffs will not impact smartphones, pharmaceutical products, or petroleum exports - offering relief to the lakhs of workers employed in their production, from iPhone assembly lines in Sriperumbudur to pharmaceutical hubs in Hyderabad Pharma city and refineries of Navi Mumbai. However, the sectors requiring immediate evaluation are the labour-intensive industries, such as textiles and apparel, as well as gems and jewellery. Employment in these sectors is estimated at 4.5 crore and 50 lakh workers, respectively - many of whom work in small-scale operations. Other sectors that warrant attention from an employment perspective include steel, aluminium, automobiles, and auto components and marine sector.
Textiles & Apparel: A large non-farm employer: From an employment perspective, textiles and apparel constitute one of the largest employers in India, after agriculture. In FY2025, textile & apparel exports to US markets alone were valued at USD 8.4 billion. This sector not only supports a significant share of the Indian workforce but also employs a higher proportion of women - particularly in Karnataka, Tamil Nadu, and Andhra Pradesh - due to concentration of ready-made garment units in these states.
Vulnerability of SME Garment units: Apparel exports are more sensitive, with around 33 percent of the garments destined for the US market in 2024. The pre-dominance of small and medium units in the ready-made garments segment makes the sector highly vulnerable – not only to global price fluctuations but also in terms of impact on employment. While the larger brands may find ways to diversify their markets, the small and medium units will need handholding to be able to navigate this period, especially as many of their orders are already committed to international brands for the upcoming Christmas season.
Gems & Jewellery: employment and export clusters a concern: Equally concerning are the gems and jewellery exports, which employ about 50 lakh workers. Major export clusters in Surat, Jaipur and Mumbai, for instance, export a large part of their production, with exports to the US market alone reaching USD 10 billion in diamonds, gold and related products in FY2025.
Diversifying export markets for resilience: As part of contingency planning in these sectors, it is important to explore expansion of India's export markets for both textiles & garments, as well as gems & jewellery - particularly in countries where we have trade agreements, FTAs, including with energy-rich countries of Middle East and Central Asia, as well as select European markets emerging as top destinations for our products. However, such export diversification and expansion may take time and concerted effort. In the meanwhile, the small and medium enterprise (SME) units in these sectors may need targeted support, potentially under the Export Promotion Mission – as has rightly been suggested in recent media reports.
Steel & Aluminium: monitoring downstream impact: Turning to steel and aluminium sectors, current employment numbers stand at approximately 35 lakhs. These sectors warrant early evaluation, as well, particularly in the context of tariffs imposed on competing countries exporting to the US, in the likelihood of US buyers seeking lower prices and diverting their demand away from Indian exports in these sectors.
Automobiles & Auto components: uneven exposure to tariffs: Automobiles and auto components sector are another large employer in India, with numbers touching about 4 crores. The export dependence in these sectors is relatively moderate, though it remains significant. In FY2025, exports of vehicles and auto parts to the US were at USD 2.6 billion. Interestingly, the segment of vehicles benefits from strong domestic demand, expected to pick up with the upcoming festive season and a supportive monetary policy, including a repo rate conducive to increased consumption of durables. However, within this segment, auto parts are more susceptible to the impact of potential US tariffs, given the possibility of American importers turning to cheaper supplies from other nations such as Canada, China or Mexico.
Policy priorities for protecting jobs: In conclusion, several labour-intensive exports from India to the US require early impact-assessment and targeted support. Sectors of particular concern from employment point of view include SMEs in apparel, gems and jewellery, auto components, downstream industries in steel, aluminium and marine farming. States that are key exporters of these products to US markets would benefit from initiating early impact assessments and developing alternative strategies, even as we remain hopeful for a fair, mutually beneficial and constructive outcome in the upcoming round of trade negotiations with the US.
(The author is Sumita Dawra, former Secretary, M/o Labour & Employment, Govt of India)
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