The 90-day pause on full roll-out of worldwide reciprocal tariffs by the US has Indian exporters hurrying to complete the orders at hand with minimum additional costs, industry sources and government officials said.
According to the sources, frontloading of orders would be more feasible in sectors where products can be airlifted, and where buyers can manage the inventory. Shipments of mobile phones and gems and jewellery, two of the biggest items of export from India to the US, are to gather pace, and concerns about disruption of their production has eased.
Apple has shipped five plane loads of i phones and other products from Indian manufacturing facilities to the US to beat the April deadline of reciprocal tariffs.
While full force of reciprocity has been held back, all countries barring will be subject to 10% additional duties effective from April 5. China, however, stands apart as it faces 125% duty. The sectoral duties of 25% on steel, aluminium, auto parts will stay for all countries including India.
In some sectors the buyers were seeking discounts on orders negotiated prior to the reciprocal tariff announcements on April 2 and pressing sellers to take 50% of the burden of additional tariffs. With 26% reciprocal tariffs it would have been hard for exporters to accommodate it. “Now if the exporters have to share 50% of 10% it is manageable,” director general of Federation of Indian Export Organisations (FIEO) Ajay Sahai said.
If the government brings back the interest subsidy scheme and takes other support measures, it will further shave-off 2.5% from the exporters’ costs, he added.
The flat 10% import duties on all countries also clears the confusion in the minds of buyers on which country to source from in view of differential tariffs, FIEO DG said. While sectors where the time between order placement and delivery is small they can expect new orders, in others like engineering where this time extends for months it may not be possible.
The pause will give enough time for completion of orders that are ready or are in the processing stage, chairman of Engineering Export Promotion Council (EEPC) Pankaj Chadha said. Exporters in engineering are sitting on 2-3 months worth or orders which will get completed and the pause does not end the uncertainty for the sector, he added.
The US is the biggest market for engineering goods from India with shipments of over $ 20 billion. Of the total $ 5 billion worth of steel and aluminium continues to attract 25% duty and even $ 2.5 billion of auto parts exports have got no relief, Chadha said.
Buyers and sellers are managing shipments of steel, aluminium and auto parts despite the tariffs after negotiations on burden sharing, he added.
Other hope exporters have is that the three-month pause may be enough to conclude the BTA with the US that will take care of higher tariffs.
“As we have already started the negotiations we will be best placed to conclude BTA in 90 days. None of the countries have had any rounds of trade discussions while India and the US have had a couple of rounds. That advantage is with us,” Sahai said.
Some industry experts feel that the strategy of the US now seems that they want to let other countries skip the high tariffs while keeping the pressure on China. “From that perspective also they will be more flexible. They would like India and few more countries to chip in so that whatever disruption is happening due to high tariffs from China that can be nullified or minimised,” they added.