The imposition of higher tariffs by the US has sparked immediate concerns and negotiations between Indian exporters and US buyers.
In response to the tariff hike announced by President Donald Trump, US buyers are seeking price reductions of 15-20% on products for which orders were placed before the tariff bombshell was dropped, as per a ToI report.
This move has led to a re-evaluation of cost structures, as both parties try to find ways to distribute the financial burden created by the tariffs.
According to Rahul Mehta, Chief Mentor at the Clothing Manufacturers Association of India (CMAI), there is significant confusion on the ground.
"There is pressure from US buyers to absorb or share the additional cost for the current orders and shipments. This has left both buyers and exporters grappling with how to adjust," Mehta said.
Challenges for smaller buyers and exporters
While large US retailers with long-term contracts have not altered their sourcing strategies, Indian exporters are waking up to a troubling trend: many orders are being put on hold.
The biggest concern among Indian exporters is the potential for “demand destruction,” especially in discretionary sectors like textiles and gems and jewellery. US consumers, facing higher prices, may delay their purchases, which could ultimately hurt sales.
One exporter explained, "US buyers, particularly smaller ones, face liquidity pressure as they will need to shell out higher customs duties on the goods already in shipment. This could affect their cash flow and make it more difficult for them to place new orders."
Global fashion brands look to recalibrate
In the wake of the tariff increase, global fashion brands are rethinking their sourcing strategies.
According to Kashika Malhotra, Head of Business Development at Brandman Retail, which distributes US brands such as Jansport and Timberland in India, some buyers and exporters have already begun negotiating to share the additional tariff burden.
"We are hearing that some buyers are discussing a three-way split between the seller, buyer, and consumer to distribute the added cost," Malhotra said.
However, not all businesses are willing to absorb the new costs.
A leading garment exporter pointed out, "In our industry, margins are so low that it's difficult to offer any significant discounts. The margin pressure is real, and absorbing the additional tariff cost is tough for us."
While large-scale sourcing plans may remain intact for the moment, the changes in tariffs have had an immediate effect on production and logistics. Several factories are now juggling schedules, and shipments to the US have been delayed.
As a result, some companies are taking a "wait and see" approach, putting off major procurement or expansion decisions until the full impact of the tariff hike becomes clearer.
Despite these hurdles, there is a silver lining for Indian exporters. Malhotra reassured that India remains an important partner for global retailers. "While global retailers are recalibrating their strategies, India remains very much on their sourcing map. The consensus is to work together on solutions," she added.
India’s competitive edge
Though the tariff hike has impacted Indian exporters, there are signs that the country still holds an edge over its competitors in Southeast Asia.
Shiraz Askari, President of Apollo Fashion International, highlighted that while India faces its challenges, other countries like Vietnam and Bangladesh are subject to even steeper duties.
"India may be affected, but it still has a competitive advantage, especially when compared to its peers," Askari said.
(With inputs from ToI)
In response to the tariff hike announced by President Donald Trump, US buyers are seeking price reductions of 15-20% on products for which orders were placed before the tariff bombshell was dropped, as per a ToI report.
This move has led to a re-evaluation of cost structures, as both parties try to find ways to distribute the financial burden created by the tariffs.
According to Rahul Mehta, Chief Mentor at the Clothing Manufacturers Association of India (CMAI), there is significant confusion on the ground.
"There is pressure from US buyers to absorb or share the additional cost for the current orders and shipments. This has left both buyers and exporters grappling with how to adjust," Mehta said.
Challenges for smaller buyers and exporters
While large US retailers with long-term contracts have not altered their sourcing strategies, Indian exporters are waking up to a troubling trend: many orders are being put on hold.
The biggest concern among Indian exporters is the potential for “demand destruction,” especially in discretionary sectors like textiles and gems and jewellery. US consumers, facing higher prices, may delay their purchases, which could ultimately hurt sales.
One exporter explained, "US buyers, particularly smaller ones, face liquidity pressure as they will need to shell out higher customs duties on the goods already in shipment. This could affect their cash flow and make it more difficult for them to place new orders."
Global fashion brands look to recalibrate
In the wake of the tariff increase, global fashion brands are rethinking their sourcing strategies.
According to Kashika Malhotra, Head of Business Development at Brandman Retail, which distributes US brands such as Jansport and Timberland in India, some buyers and exporters have already begun negotiating to share the additional tariff burden.
"We are hearing that some buyers are discussing a three-way split between the seller, buyer, and consumer to distribute the added cost," Malhotra said.
However, not all businesses are willing to absorb the new costs.
A leading garment exporter pointed out, "In our industry, margins are so low that it's difficult to offer any significant discounts. The margin pressure is real, and absorbing the additional tariff cost is tough for us."
While large-scale sourcing plans may remain intact for the moment, the changes in tariffs have had an immediate effect on production and logistics. Several factories are now juggling schedules, and shipments to the US have been delayed.
As a result, some companies are taking a "wait and see" approach, putting off major procurement or expansion decisions until the full impact of the tariff hike becomes clearer.
Despite these hurdles, there is a silver lining for Indian exporters. Malhotra reassured that India remains an important partner for global retailers. "While global retailers are recalibrating their strategies, India remains very much on their sourcing map. The consensus is to work together on solutions," she added.
India’s competitive edge
Though the tariff hike has impacted Indian exporters, there are signs that the country still holds an edge over its competitors in Southeast Asia.
Shiraz Askari, President of Apollo Fashion International, highlighted that while India faces its challenges, other countries like Vietnam and Bangladesh are subject to even steeper duties.
"India may be affected, but it still has a competitive advantage, especially when compared to its peers," Askari said.
(With inputs from ToI)
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