On Govt Table: How to Help Exporters Not Lose Market Share Due to 50% US Tariff
India’s export sector is facing one of its toughest challenges in recent years as the United States enforces steep tariffs that threaten to erode competitiveness and market share. With Washington imposing a cumulative 50% duty — 25% primary tariffs and an additional 25% secondary tariffs linked to Russian oil imports — Indian exporters in key labour-intensive sectors such as textiles, leather, shrimps, and apparel are now battling higher costs and reduced access to their most important market.
To cushion the blow, the Indian government is working on a package of mitigating measures designed to keep exporters afloat and prevent them from losing ground to competitors such as Vietnam, Bangladesh, Indonesia, and Cambodia, all of whom are already benefitting from lower tariff regimes and stronger trade ties with the US.
The Tariff Shock and Its Implications
The recent tariff escalation by the United States has reshaped the economics of Indian exports. While the initial 25% duty already made Indian shipments costlier, the secondary 25% imposed from August 27 as a consequence of India’s continued purchase of Russian crude has compounded the challenge.
This sharp increase has drastically altered India’s comparative advantage. Goods that were once price competitive are now struggling to find buyers, particularly in cost-sensitive categories like ready-made garments and shrimps. The margins in these industries are already thin, and the steep duties make Indian products significantly more expensive compared to rivals.
Leather and textile exporters, in particular, have voiced concerns. For an industry that employs millions in labour-intensive clusters spread across Tamil Nadu, West Bengal, Gujarat, and Uttar Pradesh, any drop in orders could have severe employment implications.
Export Growth Amid Headwinds
Interestingly, in the first half of this year, India managed to register 12% growth in textiles and apparel exports to the US. However, this performance pales when compared with competitors. Vietnam, Bangladesh, Indonesia, and Cambodia have posted higher growth rates, thanks to their more favourable trade relationships and lower tariff exposure.
The looming worry is that once the full impact of the 50% duty is felt, India’s modest growth will turn into decline. Buyers in the US, particularly retailers and fashion houses who operate on slim margins, are likely to pivot towards these alternative sourcing hubs.
The government’s concern is not just about lost revenues but about the long-term risk of losing market share. Once buyers shift supply chains, regaining their confidence becomes a long and costly process.
Government’s Mitigating Measures
Recognising the urgency, policymakers are working on a set of supportive measures to help exporters tide over the crisis. Key proposals include:
Subsidised Interest Rates
The government is exploring offering loans to exporters at subsidised rates. Lower borrowing costs would ease working capital pressures and allow exporters to maintain production levels even if profits are squeezed due to tariffs.
Collateral-Free Loans
Many small and medium exporters lack the ability to pledge assets for credit. By enabling collateral-free loans, the government hopes to provide liquidity to these firms, ensuring they can continue operations without fear of being cut off from the financial system.
Credit Guarantee Schemes
Expanding credit guarantee coverage is another idea on the table. This would reduce banks’ risk exposure when lending to exporters, thereby encouraging greater flow of credit to vulnerable sectors like textiles, apparel, leather, and shrimps.
Domestic Market Support
Exporters are also asking the government to help them tap into India’s vast domestic demand. Proposals include facilitating access to large public sector buyers like the Indian Railways, as well as private giants such as Reliance Retail and Aditya Birla Group. These tie-ups could help offset declining overseas orders and keep production units running.
Voices from the Industry
Industry bodies have been vocal about the need for immediate action. Exporters argue that without government intervention, India risks ceding market share permanently to its competitors.
A textile exporter from Tiruppur, Tamil Nadu, explained that many US buyers had already begun reducing orders. “The cost difference after tariffs is simply too big to ignore. Unless the government supports us with cheaper finance and domestic contracts, we won’t be able to survive this,” he said.
Leather exporters, too, fear a downturn. The sector, which provides employment to large numbers of artisans and small-scale units, has little cushion against external shocks. Without subsidies or credit support, many businesses could face closure.
Competitive Landscape
The countries likely to benefit most from India’s predicament are Vietnam and Bangladesh. Both nations already enjoy significant cost advantages, and their trade agreements with the US further strengthen their position.
Vietnam’s growing dominance in apparel and footwear exports has already made it a formidable competitor. Bangladesh, despite challenges of its own, remains a low-cost sourcing hub for American retailers. Indonesia and Cambodia, too, are increasingly tapping into the US market, offering products at competitive prices.
In this context, India cannot afford complacency. The government’s proposed measures are aimed not just at temporary relief but at ensuring exporters stay in the game long enough to weather the current storm.
Economic and Social Stakes
The stakes are high. Exports are a major contributor to India’s economy, and the labour-intensive nature of textiles, apparel, and leather makes these sectors vital from a social perspective. Millions of workers, many of them women, depend on these industries for their livelihoods.
A sharp decline in exports could lead to job losses, reduced rural incomes, and greater economic stress in already vulnerable communities. This, in turn, could have political and social repercussions, making it imperative for the government to act swiftly.
Balancing Trade and Diplomacy
The tariff escalation is also a reminder of the tightrope India must walk in balancing trade relations and diplomatic priorities. While access to affordable Russian oil has provided India with a strategic economic advantage, the US response underscores the costs of pursuing independent energy policies in a geopolitically sensitive environment.
The government is thus under pressure to not only manage the fallout for exporters but also to engage diplomatically with Washington to ease trade tensions. The challenge lies in ensuring energy security without sacrificing export competitiveness.
The Road Ahead
For now, the immediate task is to support exporters with financial and policy tools. Subsidised credit, collateral-free loans, and greater domestic market access can provide short-term relief. However, the long-term solution may lie in diversifying export markets, strengthening trade alliances, and investing in competitiveness through technology and infrastructure.
The government’s willingness to step in is a positive sign, but the effectiveness of its measures will depend on speed and scale. Time is of the essence, as exporters warn that once supply chains shift away from India, it may take years to rebuild those relationships.
Shielding India’s Exporters from Tariff Heat
The 50% US tariff represents a formidable challenge for India’s exporters, but it also highlights the need for resilience and adaptability in trade policy. As the government rolls out measures to cushion the blow, the broader question remains: how can India safeguard its exporters from external shocks in an increasingly volatile global trade environment?
For now, exporters will be looking to New Delhi not just for promises but for swift, tangible action that ensures they remain competitive on the global stage.
Click Here to subscribe to our newsletters and get the latest updates directly to your inbox.