Government Implements Support Measures to Protect Exporters from Trump Tariff Impact

The Indian government is devising strategies to support exporters in sectors like textiles and chemicals, aiming to shield them from the impact of the new tariffs imposed by US President Donald Trump. An official stated that these tariffs, which include an additional 25% import duty on Indian goods entering the US, will take effect from August 7.

Indian exporters, particularly in food, marine, and textiles, are seeking financial aid and affordable credit to manage the increased tariffs. They have requested fiscal incentives such as interest subsidies and extensions of schemes like RoDTEP (Remission of Duties and Taxes on Exported Products) and RoSCTL (Rebate of State and Central Taxes and Levies). The government is considering these demands and plans to collaborate with states to assist exporters.

Impact on Key Sectors

The high US tariffs will affect various sectors including textiles, gems and jewellery, shrimp, leather, chemicals, and machinery. Some sectors like textiles and shrimp face more challenges due to lower duties in competitor countries like Bangladesh (20%), Vietnam (20%), and Thailand (19%). An exporter noted that the US is a significant market for Indian shrimp, suggesting exploring new markets such as the UK, China, and Japan.

Despite uncertainties, electronics exports, including smartphones, are showing healthy growth in the US. The government aims to mitigate tariff impacts on vulnerable products while ongoing talks on a Bilateral Trade Agreement (BTA) could help restore normal tariff levels. The sixth round of BTA talks is scheduled for late August with a target to conclude by October-November.

Trade Negotiations and Tariff Details

The US team will visit India for five-day negotiations starting August 25. The new duties apply to shipments leaving after August 7. Cargoes departing before this date and reaching US warehouses by October 5 will incur a baseline tariff of 10%. In a July 4 meeting with Commerce Minister Piyush Goyal, leather exporters sought a 5% duty credit scrip and interest subvention to remain competitive globally.

An exporter highlighted that labour costs in the US are about USD 25 per footwear pair, whereas India can produce them for USD 15-20. Sports shoes cost even less at USD 5-10. From January to June, India's leather exports to the US rose from USD 548 million last year to USD 598 million this year.

Interest Equalisation Scheme Revival

Exporters have long advocated for reviving the Interest Equalisation Scheme (IES), which expired on December 31, 2024. This scheme offered a 3% subsidy on pre- and post-shipment credit. Exporters now want this increased to 5% to better compete with nations having lower interest rates. Currently, Indian interest rates range from 8% to over 12%, while competitor countries have much lower central bank rates: China at 3.1%, Malaysia at 3%, Thailand at 2%, and Vietnam at 4.5%.

This year's Union Budget introduced an Export Promotion Mission (EPM), under which IES is expected to be included. Work on EPM's framework is ongoing. Exporters also propose increasing tax refund rates under RoDTEP and RoSCTL schemes. RoSCTL benefits the apparel sector most affected by reciprocal tariffs. RoDTEP covers 10,500 products with refund rates from 0.3% to 3.9%. Previously costing Rs 2,500 crore annually for IES, RoDTEP's FY26 outlay is projected at Rs 18,233 crore.

With inputs from PTI