【By Observer News, Qi Qian】

Not long ago, India's largest shoe manufacturer, Farid Group, selected a piece of land in the southern state of Tamil Nadu, India, to build a large export factory. But a blow from Washington came one after another: US 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 halted, and a project worth about $114 million was frozen.

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

The report states that Farid Group is not an isolated case. This move by Trump will make India the country with the highest tariffs in Asia, threatening Prime Minister Modi's "Make in India" initiative, which he has been striving to build over the past decade, aiming to challenge countries like China in manufacturing. The plan originally aimed to increase the share of manufacturing to 25% of the economy, but according to World Bank data, this proportion was only 13% last year, lower than 16% in 2015.

Bloomberg mentioned that in recent years, Indian manufacturing had shown some of the prospects envisioned by Modi.

For example, Apple expanded its iPhone assembly business 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 United States accelerated the adoption of the so-called "China+1" strategy by American companies 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 in jeopardy. Although the increased tariffs currently exempt smartphones and pharmaceutical industries, the high 50% tariffs put the rest of India's $87 billion 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 withdraw from India."

Workers at Farid Group's factory producing shoes. Farid Group website

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

Alexander Slater, head of Capstone India's business, said: "In addition to economic challenges, for PM Modi, India is now facing a tricky political issue because India is paying higher tariff rates than China."

Bloomberg economist Chetna Kumar said: "Without a deal, we estimate long-term potential GDP growth would decrease by 1.5 percentage points, while our previous optimistic projection for 2030 was 9%. The impact may come from weakened confidence, reduced investment, declining exports, and setbacks in the Make in India ambition."

The anxiety in Indian factory workshops is evident. Ajay Sahai, CEO of the Indian Export Organization Federation, said that short-term export demand might fall by 20%. Although it is currently the ordering period for summer 2026, the 50% tariff has deterred buyers. He said: "I receive 80 to 90 calls every day from exporters asking for solutions. It's very difficult to do business under tariff conditions."

Some Indian factories are slashing prices significantly to retain customers. Trend Setters Group, a clothing manufacturer, said the only way to keep buyers was to offer big discounts. Technocraft Group, which produces scaffolding and textiles, has about a third of its sales directed towards the US. The company's general manager is calculating how to reduce costs for buyers and said, "The additional tariffs make no sense and will severely affect our trade."

Bloomberg reports that US and Indian officials are continuing trade negotiations, and there is still hope for a trade agreement.

However, the report pointed out that time is not on India's side. The longer this uncertainty lasts, the more companies will abandon India and start looking for other options. P. Senthil Kumar, partner at Vector Consulting Group, said that India has a small share in many product categories, and if US brands decide to shift their supply chains, they can act quickly.

For Farid Group, the tariff threat is particularly personal, as its shoe factory employs about 23,000 people, more than half of whom produce for the US market. Each time shipments are suspended or orders are canceled, difficult decisions must be made: either stop or slow down production, or lay off employees who have honed their skills over the years.

"It's impossible to make business decisions under this uncertainty," Ahmed said, "What about the workers? Should we fire them? They've been with me for years, they're skilled workers, I can't just send them back." He added, "The workers will be the biggest victims."

On February this year, Modi and Trump met at the White House. Visual China

On local time June, Trump announced an additional 25% tariff on Indian goods, bringing the total tariff level to 50%. This additional tariff measure will take effect on August 28, local time. Trump said this was to "punish" India for continuing to purchase Russian oil.

Before this, Trump had been pressuring India, criticizing it on social media, accusing it of buying Russian weapons and energy. He once criticized India's high tariffs as "strict and annoying," calling India and Russia "dead economies."

"At 74, Modi is experiencing one of the most difficult periods of his 11-year tenure," Reuters previously reported. After these threats take effect, India will face one of the highest tariffs in the world. This led to serious chaos in US-India relations and put Modi's government in a dilemma.

According to the report, Modi has started to counterattack. On local time July, Modi stated that he would not sacrifice the interests of Indian farmers, "I am ready. India is ready." It is reported that after Trump imposed additional tariffs, India suspended its plans to purchase US arms. At the same time, Modi increased interactions with Russia, China, Brazil, and other countries. It is reported that Modi plans to visit China and meet with Russian President Putin.

According to an article from the Indian newspaper Hindustan Times on the 10th, Professor Jeffrey Sachs, an economics professor at Columbia University and director of the Harvard International Research Center, gave advice to India in an interview with the newspaper. Sachs said that in fact, American politicians care little about India, and India will not gain any security benefits by aligning with the US to counter China.

Against this background, India's re-adjustment of its relationship with China is considered a key move to balance the US. However, Lin Minwang, researcher and vice president of the Institute of International Issues at Fudan University, previously told Observer that for India, turning to China and Russia is part of its diplomatic strategy of playing both sides. He analyzed that how far Modi can improve relations with China, the Shanghai Cooperation Organization, and Russia remains to be seen.

This article is an exclusive article from Observer, and it is not allowed to be reprinted without permission.

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