US Tariffs Won't Stop Indian Goods, Just Make Routes Longer: Exporters

Since the announcement on Wednesday evening (India time), many Indian exporters are keeping their fingers crossed and waiting to read the fine print of the new tariff rules that are set to come into force from today.

“Just as water finds its way, exporters will also find a way to sell goods to the US. Indian goods will now be sent through transshipment hubs of South Korea or Vietnam,” said an exporter of gems and jewellery.

The US is a huge market for Indian exporters in this sector. Echoing his sentiment, an exporter of chemicals, dyes and intermediates, pointed out that Indian goods are still exported to Pakistan via Dubai and China, even though political and diplomatic relations with both countries are poor. 

“Similarly, Indian goods will now go to the US,” he said, adding that the 25 per cent tariff and the penalty for buying Russian oil, though, are too high. “We hoped that the tariffs would be around 10 per cent,” he remarked.

He added that Indonesia could be another hub for exporting Indian goods to the US, as recently, the US and Indonesia have finalised a bilateral trade agreement. 

A pharmaceutical exporter said the only source of information till now has been Trump's social media post, and more information is needed before India can prepare a response. “Trump has been extremely unpredictable. No one knows what he will do next. The only information available is through a social media post. We are awaiting more clarity,” he said.

The US remains a major market for Indian pharma. Showing concern, an IT exporter flagged the short notice window given. “The announcement was made on July 30, and the new tariffs are applicable from August 1. This gives us very little time,” he said. 

Many in the business community are speculating over the reasons that could have prompted such a response from the US President. A common view is that India’s firm stand on keeping its agriculture and dairy sectors closed to foreign access might be a sticking point, and the tariffs are possibly a way to apply pressure.

“However, these are very sensitive sectors for India. Opening them up to imports may have political repercussions. We must note that these sectors were left out of the recent Comprehensive Economic and Trade Agreement (CETA) with the UK. So, obviously, the Indian government will not allow dairy and agricultural imports from the USA,” said an exporter. 

Speculation is also swirling that the sudden tariff announcement may be linked to India’s firm position that the ceasefire during Operation Sindoor happened without any foreign mediation. “The announcement on tariffs came just a day after Prime Minister Narendra Modi’s statement in the Lok Sabha that no leader from any country had a role in the ceasefire. So, Trump’s announcement could be a retaliation,” said a veteran exporter.

As of now, Indian exporters have their fingers crossed and are awaiting more updates from the US.