New Delhi: The 10 per cent tariff imposed by the US on imports from India will make Indian products costlier in the American market, though the overall impact should be assessed in the context of tariff rates applicable to competing countries rather than the headline duty alone, exporters said.
However, according to textile exporters, the US decision to grant textile tariff-rate quotas (TRQs) to Bangladesh, Cambodia, Indonesia and Malaysia based on their imports of US cotton could reduce demand for cotton, yarn and other intermediate goods sourced from India.
The United States has imposed a 10 per cent tariff on goods imported from India and 16 other countries as part of its efforts to combat the use of forced labour in the production of such items.
The Federation of Indian Export Organisations (FIEO) has stated that “while the additional 10 per cent Section 301 tariff imposed by the United States on imports from India will increase the landed cost of Indian products, the overall impact should be viewed in the proper competitive perspective rather than through the headline tariff alone”.
S C Ralhan, President, FIEO, said the fact is that India has been placed in the lower 10 per cent tariff category, while several competing exporting nations, including China, Vietnam, Thailand, Turkiye, UAE, Brazil, South Africa and others, face a higher tariff of 12.5 per cent.
This has helped India secure a relatively favourable position compared to many of its global competitors, he said.
Ralhan added that many of India’s direct competitors in labour-intensive sectors such as textiles, garments, leather and footwear, including Bangladesh, Cambodia, Pakistan, Sri Lanka, Indonesia and Malaysia, have also been subjected to the same 10 per cent tariff.
“Consequently, Indian exporters largely retain their relative competitiveness in these sectors, as competing suppliers will face a similar duty incidence in the US market,” he said.
FIEO advised exporters not to draw broad conclusions based solely on the additional 10 per cent tariff but to undertake a product-wise assessment of the applicable US tariff, available exclusions and the tariff treatment of competing supplier countries.
TEXTILE ISSUE
According to think tank GTRI, India has not received the textile and apparel tariff-rate quota (TRQ) exemption under the new US Section 301 forced-labour tariff.
The exemption applies to specified volumes of textile and apparel exports from Bangladesh, Cambodia, Indonesia, and Malaysia that use US-origin cotton and fibre.
The USTR has announced that textile TRQs (quota-based duty concessions) will be established for Bangladesh, Cambodia, Indonesia, and Malaysia for an initial period of three years.
Under this, these countries would import US cotton and textile goods for final manufacturing and export to the US at a concessional duty.
Bangladesh is one of the major textile exporters in the world. It is also a top competitor of India in the sector. Bangladeshi traders import large quantities of Indian cotton and fibre, but after this TRQ, they may now import from the US.
The Confederation of Indian Textile Industry (CITI) on Friday expressed “grave” concern over the United States imposing a 10 per cent tariff on Indian goods.
“The tariff imposition on the issue of forced labour is deeply unfortunate as it does not indicate an expiry date, causes reputational risks,” CITI Chairman Ashwin Chandran said.
“What could raise a serious challenge for Indian textile and apparel exporters is the fact that although many key competitors of ours have also been subject to the same tariff rate, a window has been opened for textile and apparel exports from these countries to enter the United States free of the Section 301 tariffs. This differential treatment risks diverting sourcing orders for textile and apparel items away from India,” Chandran pointed out.
He added that the US tariff imposed on India on the issue of “forced labour” could also affect exports of intermediate textile items from India to other nations.
The US is the single-largest market for India’s textile and apparel items. Exports of textile and apparel products from India to the US are usually close to USD 11 billion.
In February, Commerce and Industry Minister Piyush Goyal expressed confidence that India will get concessional duty access for garments made using American yarn and cotton under its trade agreement with the US, similar to the benefits currently provided to Bangladesh.