New Delhi: India’s textile and garment exporters are exploring shifting parts of their manufacturing operations overseas “to protect their crucial US market following the imposition of steep new tariffs,” according to The Financial Express. The additional 50% duty on Indian exports which has come into force, has companies considering moving of the final stage of production to countries like Bangladesh, Sri Lanka, Ethiopia, Egypt, Indonesia and Jordan.

Exporters had already shipped out winter consignments to the US, but spring orders which are currently in process, have come under strain. “Some buyers are now demanding additional discounts of 5% to 20% to offset the tariff hike,” Mukesh Kansal, chairman of CTA Apparels, told The Financial Express.

The move will not be easy. Other than the challenge of managing complex supply chains, exporters will also have to work with much lower margins. They will “continue to work with the hope that things will be sorted out in next 2-3 months,” secretary general of Apparel Export Promotion Council Mithileshwar Thakur told the newspaper.

The tariff on India is the highest in Asia, creating serious problems with pricing and competitiveness for labour-intensive sectors in particular. The Union government has extended the exemption of import duty on cotton till December 31. 

There are reports of companies are “holding back on big investment decisions pending clarity on domestic demand and the global trade outlook,” Business Standard quoted a senior executive at Bank of America Corp as having said.

“Should the external environment shift in India’s favour, confidence in the durability of the demand cycle would rise,” said the Mumbai-based banker. “Until then, these uncertainties are leading to delays in decision-making and keeping companies in a wait-and-watch mode,” said Shankar Subramaniam, the bank’s chief of India corporate banking.

Reporting from the ground, the newspaper has found that workers and small business owners fear loss of livelihood as factories have “reduced operational hours amidst cancelling of orders”

The Economic Times records the sharp slump in the stock market this morning (August 28, Wednesday), saying “Trump tariffs rattl D-Street traders”. It analyses that the tariff is “the single biggest drag” on the market, but also warns of “cocktail of other headwinds,” including “weak global cues and sustained foreign fund outflows.”

Business Standard has also reported that senior Indian officials are looking at the tensions between India and the US as merely creases, and do not appear very concerned. An unnamed official has described them as a “temporary phase in a long-term relationship”.  On trade deal talks, the official is quoted as saying: “Communication channels are open. Both sides have concerns regarding how these things will play out, and both sides are looking at how to resolve these issues… Keeping those channels of communication open is important. There was a statement given by the leaders (Prime Minister Narendra Modi and US President Donald Trump) about the BTA (bilateral trade agreement). Work would still continue to be there.”

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