US tariffs: Shoemakers take measured steps
Brands are looking to reroute some of their orders to the US through other Asian hubs and players including American firms Crocs and Nike may be putting a pause on new export orders to the US from India until there is further clarity on trade talks between the two countries, sources indicated.
A 25% tariff has already eroded India's export competitiveness compared to other regions such as Vietnam and Indonesia and another 25% would altogether bring business activity to a halt, fear exporters.
"Indian manufacturers will lose out on US orders. Those will start getting shifted to places like Vietnam," said an industry source.
In the apparel sector, US retailers are putting pressure on exporters to shift production for the US to other locations such as Bangladesh and Vietnam, said Pallab Banerjee, MD at cloth manufacturer Pearl Global which counts major US brands among its customers. "Orders that are on the way are not impacted but 50% tariff will not be viable for anyone.
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For us, production for US will now move to our factories in other manufacturing countries," said Banerjee.
For Pearl's India factories, US accounts for 50% of its production.
Mails sent to Walmart, Gap remained unanswered. Sources familiar with the matter said that Walmart has not paused or cancelled orders as of now.
Not all doom and gloom
Brands are certainly not reviewing their India growth plans or the idea to remain invested in the country; not now at least.
Most of them are on a wait and watch mode and will take decisions based on how the deal talks between India and US pan out later this month. "Companies will wait until there is clarity. But if the 50% tariff indeed gets applied, most of the orders to the US from India will stop getting shipped from that day," said Simon Lee, vice-president at the Taiwan Chamber of Commerce in India.
Detailed questionnaires sent to the global teams of Puma, Adidas, Nike, Converse and Crocs didn't elicit a response. Puma and Adidas, however, indicated that India remains an important sourcing market for them.
Sivaramakrishnan Ganapathi, managing director and vice chairman at Gokaldas Exports, said that the company has started to diversify the markets where it sells and the FTA with UK will be a big help.
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