From Donald Trump’s tariff barrage against India this week, the Textile manufacturer Pearl Global – whose list of US clients includes Gap and Kohl’s – has been receiving panic calls at midnight with an ultimatum: Sharing the tariff impact or transferring production outside India.
To calm the restlessness of American customers, Pearl Global offered to transfer production to their 17 factories in Bangladés, Indonesia, Vietnam and Guatemala to avoid high US tariffs to Indian imports.
“All customers are already calling me. They want us to move from India to other countries,” said General Director Pallab Banerjee in an interview.
Trump’s initial tariff proposals in April – which were lower for India than for the rival Asian textile centers of Bangladés, Vietnam and China – had seen themselves as an opportunity for India to quickly expand in the clothing export market, valued at 16,000 million dollars.
But the situation changed as the relations between New Delhi and Washington deteriorated, and now India faces a 50% tariff, compared to 20% of Bangladesh and Vietnam, and 30% of China.
Pearl gets approximately half of his United States business. Some customers offered to continue importing India products if the company could share the tariff load, but that is not viable, said Banerjee, without identifying customers.
Indian textile sector faces production shortage
The 50% American tariff – which includes 25% that entered into force this Thursday and another 25% that will enter into force on August 28 as a penalty for the purchase of Russian oil – surprised American buyers of clothing and their Indian suppliers, who claim to be considering transfer their manufacturing operations beyond the Indian coasts, even to less consolidated textile centers as ethiopia and Nepal
Some exporters also claim that their US clients asked them to suspend their orders.
New Delhi described the Trump tariffs as “extremely unfortunate.”
The Indian textile sector already faced a shortage of labor and a limited production capacity. However, the perspective that exporters moved production outside India would also be a hard blow to the policy “made in India” of Prime Minister Narendra Modi.
While Pearl can use its foreign factories to satisfy US orders, exporters that depend on national factories will be much more affected.
Richaco Exports sent garments worth 111 million dollars to the United States this year, with clients such as J. Crew Group, according to customs data. All were manufactured in their more than two dozen factories distributed throughout India. About 95% of its annual income in India come from the United States, says Director General Dineh Raheja.
“We are exploring the possibility of establishing a manufacturing base in Katmandú (the capital of Nepal),” he said. “The industry is stagnant.”
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Earlier this week, Titan, the largest jewelry and watches manufacturer in India, declared that he was considering moving part of his production to the Middle East to maintain access with low tariffs to US markets.
Amit Agarwal, Raymond’s financial director, the Indian clothing manufacturer, said they have their hopes on the company’s only factory in Ethiopia, which faces an American tariff of only 10% and could add more production lines in three months to serve US customers.
The tariff threat arises at a time when India is emerging as a great alternative for American clothing buyers such as Walmart, while Bangladesh faces a political crisis and companies seek to diversify their supply chains beyond China.
Tarupur, the center of the Indian preparation in the south, considered the capital of the country’s point genre and that represents almost one third of clothing exports, was optimistic about the future earlier this year when Reuters visited it and spoke with exporters.
With Reuters information
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