msmes-to-be-most-hit-by-us-tariffs-say-analysts

Hiked tariffs imposed by the US administration on Indian imports will significantly impact smaller businesses, especially those that depend majorly on exports.

India’s micro, small, and medium enterprises (MSMEs), which account for nearly 45 per cent of India’s exports, are expected to take the worst hit of the tariffs. Of these, those that deal with textiles, diamonds, and chemicals are likely to take the onslaught of the increased tariffs, said a report by rating agency, CRISIL Intelligence. 

The US levies ad valorem duty of 25 per cent on Indian goods; but with an additional 25 per cent duty imposed recently by US President Donald Trump on Indian imports to the US, the total duties now stand at a massive 50 per cent – one of the highest rates imposed on any country. These are to come into effect from August 27 this year, unless Trump changes his mind.  

Textiles, gems and jewellery account for 25 per cent of India's exports to the US, and the MSMEs have more than 70 per cent share in these sectors, the report has further stated.

 

Also Read: Govt invites textile firms to avail PLI scheme benefits

Another sector which is likely to face the heat is chemicals, where MSMEs have a 40 per cent share.

Traders in the gems and jewellery hub of Gujarat are bracing for impact, the report says, since diamonds account for over 50 per cent of the country’s gems and jewellery exports. The US is a major consumer of India’s gems. 

Domestically, India also faces stiff competition in the export of chemicals from Japan and South Korea, which have been subject to lower tariffs by the US. 

In steel, the US tariffs are expected to have a negligible impact on the MSMEs as the units are mostly engaged in re-rolling and long products. The US primarily imports flat products from India.

The Indian textiles industry has also been worried about the impact of the tariffs and has asked the government for additional fiscal support to buffer the losses faced by it when the tariffs come into effect. Ready-made garments are expected to lose ground in the US compared with peers like Bangladesh and Vietnam, which face lower tariffs in their bilateral trade agreements finalised with the US.