Indian manufacturers are panicking: already inferior to China, how can they compete after the US imposes a 50% tariff?

Not long ago, India's largest shoe manufacturer, Farid Group, selected a piece of land in the southern part of Tamil Nadu, India, to plan the construction of a large export factory. However, a blow from Washington followed closely: President Trump announced tariffs as high as 50% on Indian goods. For Farid Group, which relies on the US for about 60% of its business, the impact was immediate: new orders came to a halt, and a project worth approximately $114 million was frozen.

According to a report by Bloomberg on August 14, Farid Group's chairman Rafiq Ahmed said in an interview: "With a 25% tariff, you can still operate, offer some discounts, negotiate with buyers, and adjust profits. But with a 50% tariff, you have nothing."

The report stated that Farid Group is not an exception. Trump's move will make India the country with the highest tariffs in Asia, threatening Prime Minister Modi's "Make in India" initiative, which he has been working on for a decade to challenge the manufacturing sectors of countries like China. The initiative originally aimed to increase the share of manufacturing to 25% of the economy, but according to World Bank data, this ratio was only 13% last year, lower than 16% in 2015.

Bloomberg mentioned that in recent years, India's manufacturing sector had shown some of the prospects envisioned by Modi.

For example, Apple expanded its iPhone assembly operations in India, making India the second-largest smartphone producer in the world after China. Progress was also made in the pharmaceutical and green technology sectors. The US accelerated the adoption of the so-called "China + 1" strategy by American companies through policies and actions to diversify supply chains, and now the US has become India's largest export market and one of the main sources of foreign investment.

However, this progress is now under threat. Although the tariff hike currently exempts smartphones and pharmaceutical industries, a 50% tariff puts the rest of the $87 billion in India's exports to the US at risk.

"Now, don't even mention 'China + 1'; companies are already considering 'India + 1,' " Ahmed said, adding that foreign companies "are planning to pull out of India."

According to Bloomberg Economics estimates, if the 50% tariff persists, India's exports to the US could drop by 60%, putting nearly 1% of GDP at risk. If pharmaceuticals and electronic products no longer receive exemptions, the export decline could reach as high as 80%. Even the previous 25% tariff, which is higher than Vietnam, Malaysia, or Bangladesh, is sufficient to threaten a 30% drop in exports.

Original: www.toutiao.com/article/1840432944015495/

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