Tariff turbulence: Ludhiana industries oscillate between resilience, risk

The final report in the series gauges Ludhiana's industrial pulse as 50% US tariff looms

From the crack of dawn, the wide, dusty lanes of Ludhiana’s Focal Point industrial cluster stir to life. Set up in the late 1980s, the cluster sits just off the Grand Trunk road, housing hundreds of export units whose businesses extend across the globe. 

Among them is 25-year-old Kapil, a press operator at a forging unit that manufactures auto parts. His day begins as usual, but the mood is anything but steady. His company’s biggest clients, based in the United States, have begun cancelling orders. “I got to know that US President Donald Trump has imposed harsher tariffs on India. My unit exports parts to the US. Since we won’t be supplying them, our work will suffer. It will be difficult for people like me to find work in the coming days,” he says. “I hope it gets resolved soon.” 

On August 6, Washington announced a further 25 per cent tariff on imports from India, doubling the overall burden to 50 per cent. The move, effective from August 28, puts India at a stark disadvantage against competitors such as China in virtually every category of merchandise entering the US. 

Ludhiana, Punjab’s industrial heart, is at the centre of the storm. More than 300 firms here ship goods directly to the US — auto parts, engineering goods, hosiery, textiles, hand tools, and agricultural products. Industry leaders warn of losses upwards of ₹10,000 crore as buyers cancel orders stretching beyond September.   

And yet, exporters in the city strike a remarkably calm note. For them, this is a storm to be weathered, not a crisis to buckle under. They speak of resilience, of alternative markets, of faith in negotiators. 

“Though the city’s overall exposure to the US markets is moderate, the firms which are majorly dependent on it are going to face the brunt. More than textiles, it is the engineering goods and auto part units that are going to suffer as they have a larger exposure,” says Sudarshan Jain, president of the Knitwear and Apparel Manufacturers Association of Ludhiana. 

According to him, exporters had begun hedging against such risks way back in April when Trump had first announced reciprocal tariffs on the US’ trading partners. “Though Ludhiana is Punjab’s ₹20,000-crore textile hub, it is majorly domestic oriented. The sector, which mostly comprises micro and small businesses, has already taken blows from demonetisation, GST, and the Covid pandemic. But it will not be much affected by the US move,” he adds. 

Harish Dua, founder chairman of KG Exports, insists diversification is a tried and tested method. “The UK free-trade agreement has opened new markets for us. While it is true that US buyers have cancelled immediate orders, we remain hopeful this issue will get resolved in the coming months. Even if tariffs settle at 25 per cent, Indian exporters still hold an edge. Our competitors like Vietnam, Bangladesh and Indonesia still face high US tariffs. In some ways, this benefits us.” 

Government data appears to bolster that optimism: Exports to the US make up just 2 per cent of India’s GDP. Of $443 billion in total goods exports, only $81 billion are US-bound. Punjab’s contribution was $700 million in FY21. 

For J R Singal, founder chairman of the JRS Eastman group, which manufactures auto parts, the tariffs are more about geopolitics than economics. The government did right by taking a stand for Indian farmers and the dairy sector by not allowing US imports, he said, adding, that’s what triggered this all. “The US wants (a trade deal with) India on its terms. But exporters in this city were prepared well in advance and had front-loaded their orders,” Singal adds. “There might be some loss in the short run, but we will eventually overcome it.” 

But on the ground, the story feels less assured. For Ludhiana’s million-strong migrant workforce, the anxiety is palpable. Narendra Ram, 44, has travelled from Jharkhand every year for two decades to work as a dyer. He also runs a small garment business. With the festival season looming, the period when workflow is steady, his worry deepens. 

“This conflict is not good. We hope and appeal to the government that this gets resolved soon. Else, we will get work for lower wages and for fewer days,” he says. 

S C Ralhan, president of the Federation of Indian Export Organisations, strikes a cautionary note. Unlike textiles, where alternatives abound, he argues that engineering goods and auto parts are deeply embedded in US supply chains. “Our machines and products are tailored to US specifications. Transitioning to other markets will not be smooth. Many units here have already cut operational hours and reduced wages. It may take up to two years to recover fully. In the meantime, close to 200,000 people in this city risk losing their livelihoods.” 

Ralhan urges the government to step in with a ₹20,000 crore support package. And if the US remains unyielding, he adds, India must fast-track trade deals elsewhere. 

Testing times

 

*  Over 300 firms ship goods, such as auto parts, engineering goods, hosiery, textiles, hand tools, and agricultural products, directly to the US

 

*  Losses over ₹10,000 crore estimated as buyers cancel orders stretching beyond September

 

*  FIEO urges the government to extend a ₹20,000-crore support package for exporters