New Delhi: The Trump administration’s reciprocal tariffs on Indian imports have affected several segments of the Indian retail industry. Products heavily reliant on exports to the United States, including garments, footwear, furniture, jewellery, and potentially rice, now face tariffs as high as 27%. This has raised concerns among businesses with significant exposure to the US market.
Impact on textile, apparel retailers
The textile sector has been among the hardest hit. India’s apparel exports to the US form a substantial part of revenue for many retail companies. A tariff hike from 5.5% to 27% has altered profitability for several exporters.
Shiraz Askari, President of Apollo Fashion International, highlighted the challenge. “The 27% tariff on Indian footwear and garment exports to the US presents a significant hurdle, especially for businesses operating on thin margins. It will affect pricing and demand in the short term,” he said.
India’s relative cost advantage remains a factor, as tariffs are lower compared to competing countries like Vietnam and Bangladesh, which face tariffs of 46% and 37%, respectively. However, the increase will force retailers to adjust pricing strategies and re-evaluate profit margins.
Jewellery sector faces new challenges
Jewellery exporters have raised concerns over the new tariff regime. India’s gems and jewellery exports to the US are valued at over $11.5 billion annually, making the change significant.
“The tariff imposed by the Trump administration will affect Indian jewellery exporters. Initial indications suggest an increase to 10% of import duty in the US from the previous 5.5%,” said Dr. Saurabh Gadgil, Chairman and Managing Director of PNG Jewellers.
Paresh Parekh, Partner and Retail Tax Leader at EY India, also raised concerns. “The sector has been struggling due to changing customer preferences, lab-grown diamond technology, demonetisation, rising gold prices, and competition from other countries. The US tariff developments now create further adverse impacts,” Parekh said.
He added, “Nearly 13% of the sector’s exports, worth around $11.5 billion, are to the US. The industry hopes the Government of India will cover this sector in its trade negotiations with the US.”
Furniture and home decor sectors affected
Wooden furniture and home decor brands are also experiencing disruptions. The 26% tariff on handcrafted wooden furniture has raised operational costs, especially for brands focused on skilled labour and quality materials.
“Handcrafted furniture involves skilled labour and materials, which makes it difficult to absorb such a heavy tariff burden,” said a representative from the industry.
Luxury home fragrances face similar challenges. Ridhima Kansal, Director of Rosemoore, explained the impact.
“Exports to the US will be harder to market and sell. As home fragrances are lifestyle products, demand will drop if prices are increased. We may have to consider measures such as reducing packaging sizes, changing ingredients, or raising prices,” Kansal said.
She noted that categories such as reed diffusers, scented candles, essential oils, and potpourri will be most affected. Due to the use of natural materials, production costs are already high even before tariffs.
“Custom and designer furniture pieces are also set to suffer as they depend on skills and know-how that cannot be reproduced easily. These factors are likely to trigger the most price-sensitive customers to withdraw. In beds and dining sets and even cabinets, is likely to cause the most problems as India is heavily invested in Sheesham and Mango wood furniture,” said Raghunandan Saraf, founder, Saraf Furnitures.
The Perspective from the food sector
Mr. Vikram Marwaha, Joint Managing Director of DRRK Foods, indicated that the potential inclusion of rice under the new tariff regime could further complicate matters.
“As of now, we are not sure that rice is present in the category, as the list is not out yet. Having said that, if it’s a 26% duty on Indian imports, it will necessarily have an effect on pricing, but our strategy is to reduce disruption while remaining competitive. While this increase will raise costs, the ultimate burden will fall on consumers, who will have to pay higher prices,” Marwaha stated.
However, he noted that DRRK Foods’ exposure to the US market is relatively lower compared to larger players, which may mitigate the immediate impact on profitability. “We are strengthening our presence in Canada and Europe to balance out any potential disruptions, ensuring business continuity without significant losses.”
Marwaha also highlighted the disparities faced by bigger players with deeper market penetration in the US. “Among the affected product categories, big players will see the most impact, particularly for bigger brands that process their products in the U.S. These companies will need to navigate rising costs and potential shifts in demand.”
Exploring new markets and strategies
The tariff regime has prompted several Indian retailers to reconsider their strategies. Some companies are looking to strengthen their presence in markets such as Europe, Australia, and the Middle East, where Indian products remain popular.
“We are now looking at improving efficiency, strengthening compliance, and exploring other markets to reduce our over-dependence on the US,” said Shiraz Askari. “But the immediate revenue hit will be significant.”
Furniture retailers are also considering setting up local assembly units in the US to minimise tariff-related costs. Shipping parts rather than fully assembled pieces can reduce expenses. This model is already used by some companies to mitigate trade barriers.
Retailers across categories are also evaluating whether to focus more on online sales and partnerships with local firms. This approach can help reduce expenses related to geographical expansion and brick-and-mortar operations.
The new tariffs may also affect future investment plans. Businesses aiming to establish retail outlets or warehouses in the US may reconsider their plans, especially if profit margins shrink.
“There will most likely be a shift towards enhancing sales through online platforms and partnering with local firms instead of geographically expanding. Businesses will have to decide in the long run if the US market is still a target, or if they would profit more in other areas,” said Saraf.
“The luxury home fragrance market has always targeted a niche audience. However, the tariffs could discourage investment in direct retail expansion. Instead, businesses may opt for collaborations with American distributors or focus on online platforms to avoid overhead costs,” Ridhima Kansal noted.
Jewellery retailers are particularly concerned about potential job losses. Paresh Parekh mentioned, “The tariff developments now create additional adverse impacts, with real risks of job losses and margin erosion.”
With inputs from PTI
