India's exports are unlikely to face any major disruption following the latest tariffs announced by the United States under its Section 301 action, although the textile sector will require close monitoring in the coming months, according to Federation of Indian Export Organisations (FIEO) Director General and CEO Ajay Sahai.
The United States on Thursday announced fresh tariff rates of 10 per cent and 12.5 per cent on imports from several economies as part of its Section 301 measures. India has been placed in the lower 10 per cent tariff category, a move that industry experts believe limits the overall impact on the country's exports.
The Office of the United States Trade Representative (USTR) said the tariffs, ranging from 10 per cent to 12.5 per cent, would apply to 60 economies. The action, directed by US President Donald Trump, is aimed at countries that the US believes have not taken sufficient measures to prevent the import of goods allegedly produced using forced labour.
According to the USTR, India is among 17 economies that will be subject to the lower 10 per cent tariff. Other countries in this category include the United Kingdom, Canada, Indonesia, Mexico and Bangladesh. Commenting on the development, Sahai acknowledged that while the announcement is not favourable, it is unlikely to materially affect India's export performance.
"It's not a welcome development but at the same time it is not going to impact our exports. If you see that India, besides other 16 countries, is placed into the 10 per cent category, whereas a large number of countries, around 38, have been put into the 12.5 per cent category," Sahai said.
He noted that India has secured a relatively better position compared with many competing economies. "The EU and Taiwan are the exception and are under the 10 per cent category, but that may include the MFN tariff also. South Korea, Japan and Switzerland are in the 12.5 per cent category, including MFN. So, by and large, we have got the best deal among these countries," he said.
Sahai further pointed out that many of the countries excluded from the investigation are not major competitors to India in key export segments, reducing the likelihood of any significant diversion of trade. "The countries who are not covered by the investigation are not the countries who have sizeable competition with us in this area. Therefore, we feel that it is not going to impact our exports," he added.
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However, the FIEO chief cautioned that India's textile and apparel sector should closely monitor future developments, particularly regarding the proposed tariff-rate quota (TRQ) mechanism for certain competing nations.
"We have to be a little careful, particularly in the textile sector, because they have worked out a TRQ which may be rolled out in times to come in respect of Bangladesh, Cambodia, Indonesia and Malaysia. We have to see what exactly finally comes in the TRQ and whether they will give further concessions or not," Sahai said.
India has not been included in the proposed textile and apparel tariff-rate quota exemption available to Bangladesh, Cambodia, Indonesia and Malaysia for specified exports manufactured using US-origin cotton and fibre. Industry observers believe the final structure of the TRQ will determine whether these competing countries gain a pricing advantage in the US market.
Sahai also clarified that products already subject to tariffs under Section 232 of US trade law would remain unaffected by the latest Section 301 announcement. "All the products where the tariff was imposed under Section 232, including steel, aluminium and automobile components, are not impacted by the latest tariff. So, the impact is limited," he said.
At the same time, Sahai reiterated that the tariffs are an unwelcome development, arguing that India has already taken adequate steps to prevent the import and export of goods associated with forced labour.
"Of course, we will say that it's not a good development because India has already given adequate proof that there is no use of forced labour import products into India. The DGFT has recently rolled out a notification also not allowing such imports into the country, and we are a signatory to the International Labour Organization and the convention on forced labour also," he added.
The latest US tariff action comes amid growing global scrutiny of supply chains and labour standards. While India's placement in the lower tariff bracket has eased concerns over a broader impact on exports, exporters and policymakers are expected to closely watch the implementation of the proposed textile tariff-rate quotas and any future changes to US trade policy that could affect India's competitiveness in international markets.
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