Will face short-term US tariff impact, says Kitex MD Sabu M Jacob

The impact of 50 per cent US tariff will be short-term as Indian market is huge and the country will be able to overcome the crisis not just in textiles, but in all sectors if it expedites the UK and EU deals, feels Sabu M Jacob, managing director of Kitex Garments, the world’s second-largest manufacturer of infant clothing. He spoke to Shine Jacob about the industry and its available options. Edited excerpts:

 

What will be the impact of the tariff imposed by the Trump administration on India’s textile and apparel industry?

 

We are in wait-and-watch mode. There is uncertainty in the market, as all buyers are holding the orders. They are confused about which country they should place the orders in, as this is getting extended for some time. I don’t think the United States will be able to avoid the Indian market completely. I hope our government may support the industry indirectly and simultaneously fast-track the agreement with the European Union.

 

In the current situation, several companies will be shut down. If the government does not take any concrete steps, we will either have to sell at a loss without any margins. This is going to be a turning point for the world. Those countries that signed agreements may also be looking at alternatives. When Trump came, we thought the US economy would get strengthened. This has shaken the entire world economy. 

 

Your customers include global majors like Walmart, Amazon, Gerber, Carter’s, Target, and others in the US. Did you get any official word from them?

 

From our clients, we have not received any official response. It is not easy to divert to another country immediately, as our export is worth around $6 billion. For them also, it is not possible to immediately change the supply to another country. All the countries like China, Vietnam, Cambodia, Sri Lanka, Bangladesh, and India are at full capacity. These countries are also feeding 85 per cent of their supply.

 

As a company, our exposure to the US market is around 92 per cent, out of our total revenue of around ₹1,001 crore. A year before that, it was around ₹631 crore. The tariff decision will affect the growth story of all the companies. While we will be able to manage the second quarter, the impact on the third quarter will be more. What I understand is that we used to have 8 per cent before, and with the current decision, our total tariff will zoom to 58 per cent.

 

What are the alternate options before India?

 

An immediate solution is the government can look at dollar devaluation to a certain extent and give additional incentives to exporters. If they give that support, the industry can overcome this crisis.

 

As a company, we have been developing the EU as an alternate destination for the last six to seven months; similarly, the UK is being given focus. In addition to this, we are also targeting more business in the domestic market by launching our own brand Little Star immediately, this week itself. The US impact on us will be short-term as the Indian market is huge.

 

With the UK deal, a business opportunity of around $14 billion will open for Indian companies; similarly, the EU market is also around $99 billion, which will open. At present, our apparel exports to the US are around $6 billion. If the government speeds up the UK and EU deals, we will be able to overcome the crisis not just in textiles, but in all sectors. 

 

There are a lot of concerns regarding job losses. How do you see this?

 

Once the tariff is finalised, we will be able to assess the damages. Already, orders for the winter season are gone. Now, we are awaiting summer business. A duty of 50 per cent means the apparel industry will come to a standstill for a short term. How companies will survive depends on the strategy they adopt. Due to the standstill, there is a possibility of layoffs. This is not just going to affect apparel, but all industries.

 

Our total export is around $87 billion, out of which less than 10 per cent is apparel. Hence, it will have a larger impact on the country. Sectors like seafood, which used to have zero duty before, will now have 50 per cent. For some industries, it is even touching 63 per cent. In apparel itself, men’s and ladies’ wear are touching up to 63 per cent.