Indian Exporters Tackle US Tariffs by Going Global
High US tariffs have become a significant concern for Indian exporters, particularly those in the gems, textiles, and specialty chemicals sectors. As these tariffs put pressure on profit margins and revenue, many companies are looking beyond their traditional markets and turning their sights overseas. This strategic shift is not just a reaction to immediate challenges but also a step towards long-term sustainability.
For instance, Raft Garments, based in Tirupur, Tamil Nadu, exports a large portion of its products to the US. The company faced uncertainty with the latest tariffs, leading to a halt in shipping half a million pieces worth ₹5 crore. In response, Raft Garments is now exploring options in countries like Sri Lanka, which has lower tariffs, to set up manufacturing facilities and re-export goods to the US.
The impact of these tariffs is particularly concerning for micro, small, and medium enterprises (MSMEs), which contribute to a significant percentage of India’s exports. According to Crisil, sectors such as textiles, gems, and seafood are expected to be hit hardest. However, industries like pharmaceuticals and electronics remain exempt from these tariff increases, providing some relief.
In addition to exploring new manufacturing locations, Indian companies are considering joint ventures and acquisitions as viable strategies to navigate the changing landscape. Firms like Kaynes Technology and Avalon Technologies are assessing their options to mitigate the tariff impacts and protect their profit margins.
Investment firms are also observing a surge in manufacturing project proposals, particularly in the automotive sector, indicating a proactive approach to the tariff challenges. Promoters are increasingly looking to set up facilities in countries like the UAE, which has a free trade agreement with India, to minimize tariff implications.
As companies strategize, they are also looking to diversify their export markets. With the upcoming Diwali season, many firms are keen to reduce reliance on the US, which accounts for a significant portion of India's total exports. Raft Garments, for example, is planning to boost exports to Europe and the Middle East as a precautionary measure.
Overall, while the immediate response to tariffs is crucial, Indian exporters are also laying the groundwork for a more resilient and diversified global presence. As they adapt to these changes, the focus remains on not just surviving but thriving in a competitive international market.
