Trump’s tariffs on India have driven a dramatic turnaround in India’s prospects of becoming a manufacturing hub. Just months ago, India was hoping to be the biggest beneficiary of the west reshoring its global supply chains away from China in the aftermath of the Covid experience of excessive reliance on Chinese manufacturing. Furthermore, India’s supposedly cordial relations with the US were expected to deliver more favourable trading terms than most other nations in Trumps’ trade wars. Now with the terms worse than most, according to this piece in the Mint, the pendulum has swung the other way – Indian manufacturers catering to the US markets are exploring moving their bases elsewhere. The piece features some on-the-ground experiences from exporters.
From a toy exporter in Bangalore: ““Our 2025 orders…the clients will take, but we have to cut rates. We have to support them. Only then they may come back. Clients are hunting for countries with the lowest tariff,” said Anshu Arya, who set up this factory post-pandemic, spotting an opportunity in the US pivot from China’s factory floor. “But our 2026 orders of $1.5 million have been halted.”
…Labour-intensive manufacturing exports in apparel, textiles, footwear, furniture, toys and gems and jewellery are likely to be the most impacted by US tariffs. The industry functions on thin margins and employs a huge chunk of the manufacturing workforce in the country. According to Crisil, last fiscal, the US accounted for about 20% of India’s merchandise exports.”
From a footwear exporter in Agra: ““Earlier, sales agents were giving us hope that with China+1, we will get lots of orders. Even Chinese manufacturers were enquiring. Now everything has unravelled,” said owner Vijay Nainani. Last year, Legwork shipped a massive order of 300,000 shoes for Costco, a retailer in the US.
Without sharing names, he said many in the industry have started shipping unfinished shoes to Vietnam, Cambodia, and Bangladesh, and are tying up with manufacturers there to finish up the final product so as to hide the country of origin and escape US tariffs on India.”
Even larger companies are hit and are being directed to finish up elsewhere: “We are right now dealing with a US customer for whom the fabric is ready in India. He said, take the fabric, give it to Bangladesh, and get it stitched to a simple garment there, and pay only 20% duty. It can be made available before Thanksgiving. For other complicated garments like suits, he has no option but to continue with us,” said Amit Agarwal, Raymond’s chief financial officer.
And there are spillover effects in other markets too. A furniture exporter from Rajasthan: “We are seeing a slowdown in orders from the EU,” said Saraf. “Our buyers are apprehensive right now about believing their own forecast. Our importers give us a sales forecast for the next six months, based on which we build our inventory. Right now, they are not confident because of tariffs and wars.”
Saraf has slowed down production in his factories to avoid a buildup of unsold inventory.”
Some are even considering moving their bases to countries which face lower tariffs:
“Agarwal said Raymond might consider ramping up production in its Ethiopia factory for the US market. Ethiopia faces only a 10% tariff.
…He is not alone in considering a diversification of production outside India as a call of last resort. Godrej Interio, which exports office furniture, is also considering increasing production from its factories in Oman and Vietnam—countries with lower tariffs than India at present. The US has imposed a 10% tariff on Oman and 20% on Vietnam.”
Whilst we can hope that there will be a reversal of sorts, Indian manufacturing exports faces dire prospects otherwise: “India’s rigid labour laws, lack of supply chain ecosystem, and high import duties on critical raw materials have kept the cost of production higher than in other Asian economies. Adding punitive tariffs, such as those imposed by the US, makes it close to impossible for India to compete for US orders.”
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