US buyers rethink India orders as Trump's reciprocal tariff woes bite

Washington’s decision to impose reciprocal tariffs on its key trade partners, including India, has put American buyers in a tough spot, even as exporters’ anxieties are rising on multiple fronts. 

Buyers are reassessing existing orders, with some seeking discounts. They are also exploring the best possible sources for imports, given the varied but steep reciprocal tariffs, exporters said.

 

In India, Customs authorities are working towards faster clearance of goods by April 9, when the reciprocal tariffs are slated to kick in. The priority is to dispatch as many consignments as possible — either by ship or by air — before April 9. 

Some exporters are worried that buyers may face liquidity issues, considering the sharp rise in tariffs on imports from 60 countries. The US’ average import tariff has been as low as 3 per cent so far. If buyers face liquidity pressure, payments to Indian exporters may be delayed, and the payment cycle could get elongated, they said. Separately, calculations are underway to gauge the impact on prices. 

On April 2 (Eastern Time), US President Donald Trump signed an executive order introducing new reciprocal tariffs, imposing additional ad valorem duties ranging from 10 per cent to 50 per cent on imports from several countries. While a 10 per cent baseline duty took effect on Saturday, additional country-specific duties will come into force from April 9. ‘Individual reciprocal higher tariffs’ will be imposed on 60 countries with which the US has the largest trade deficits. Ajay Sahai, director-general and chief executive officer of the Federation of Indian Export Organisations, said demand was likely to slow down over the next few weeks as buyers would evaluate the situation with respect to the additional duties, since India was not the only country facing high reciprocal tariffs. 

“There’s uncertainty at the moment. Buyers are calculating their liquidity position in view of the tariff hike. They will also need to assess whether their buying volume will remain the same or be reduced. This assessment will have to be made across all countries,” Sahai said.

 

Overall, every country’s exports to the US will slow down as a result of this drastic step, dampening demand for at least the next few weeks.

 

Chandrima Chatterjee, secretary general of the Confederation of Indian Textile Industry, said some buyers were asking for discounts, although the full picture would emerge in a couple of weeks.

 

Chatterjee further noted that India’s neighbouring rivals, such as Vietnam, had already offered zero-duty access to the US. If accepted, it would impact India’s competitiveness in the textile sector. The US has announced a 46 per cent reciprocal tariff on Vietnam.

 

Two Gujarat-based midsized exporters said that no negotiations had begun with buyers yet, as clarity was still lacking.

 

“The situation is quite volatile. So, as of now, no negotiations on price have begun. As manufacturers and exporters, we don’t yet know how much tariff will be levied, how much we can absorb, and to what extent we can pass it on. Therefore, it’s too early for negotiations,” said the promoter of one firm.

 

He added that they were keeping a close watch on raw material prices.

 

“China is likely to keep prices competitive, as it is facing a 34 per cent tariff. With its massive capacities, it needs markets. So, raw material prices are likely to remain competitive,” he said.

 

The US has exempted imports of pharmaceuticals, energy, and certain minerals from reciprocal tariffs. However, Trump has said he plans to impose additional tariffs on pharmaceuticals. The quantum and timelines are not yet known.

 

Bhavin Mehta, vice-chairman of the Pharmaceuticals Export Promotion Council of India, echoed this view, saying raw material prices might stay competitive due to China’s excess capacities. “In the past two to three years, China has built huge active pharmaceutical ingredient capacities, and with the US market becoming a tough entry, it would need to sell its production somewhere. Hence, prices may remain competitive,” he explained.

 

Exporters say each company might take a different approach. “Everyone has a different strategy for sourcing and will price accordingly. So, there’s unlikely to be any uniform negotiation — it will be on a case-by-case basis,” said a veteran executive who previously headed a large pharmaceutical firm in Mumbai.

 

Tiruppur, which contributes to around 55 per cent of India’s total knitwear exports, has already started seeing demands from customers in the US for discounts. Manufacturers indicate that as they operate with a squeezed margin of 5-6 per cent, it will be difficult to give huge discounts to match the Trump tariff, which may result in the global majors passing on the burden to customers.

 

“This tariff is coming at a time when the industry is performing well. We may be able to provide a maximum of around 2 per cent discount,” said K M Subramanian, president of the Tiruppur Exporters’ Association. The region saw exports worth ~33,600 crore in FY24. Global brands that source from Tiruppur belt include GAP, H&M, Tommy Hilfiger, Carter’s, and Walmart, among others.

 

WHAT NEXT

Some US buyers are seeking discounts

Exporters are worried that buyers may face liquidity issues, considering the sharp rise in import tariffs from 60 countries

If buyers face liquidity pressure, payments to Indian exporters may be delayed, and payment cycle could get elongated

Firms and their clients are also calculating the actual impact on prices