Editorial: Talk less, do more on tariffs

With America's 50% tariffs going into effect, the nation looks to Prime Minister Narendra Modi for a response to the challenge. Having staked so much on his personal ‘friendship’ with Donald Trump, no number of statements by other functionaries will sound convincing. It is he who must frame India’s response, and not in terms of sentiment but as concrete action.

So far, we have been disappointed. The PM has been late to address Trump’s tariff threats and then not squarely enough. Speaking on his home turf last week, he strained the harp a bit, saying, “From the soil of Ahmedabad, I promise you from the land of Gandhi, that the interests of small entrepreneurs, shopkeepers, farmers, and livestock-rearers are of utmost priority for Modi. I will stand like a wall between you and adversity.”

The sentiment is welcome, but an appeal to shopkeeper patriotism, to display ‘proud to be swadeshi’ signboards, does not amount to a plan of action. It is tiresome sloganeering. Also, the repeated hectoring of “farmers and livestock-rearers” misses the point. The people most affected by the Trump tariffs are export entrepreneurs whose businesses are at risk and industrial workers who could be laid off. It would help if these publics are addressed directly with specific proposals rather than generic exhortations.

The industrial clusters most affected by the US tariffs are those specialising in textiles, gems and jewellery, shrimp/seafood, engineering goods, chemicals, and leather exports. These locations of concern include Tiruppur in Tamil Nadu, which accounts for over 30% of India’s ready-made garment exports (about 40% shipped to the US); Surat in Gujarat, the global diamond and jewellery hub with an overwhelming dependence on the US market; the seafood industry of Andhra Pradesh; the engineering goods and auto components clusters around Ludhiana–Jalandhar and Chennai; the chemical hub of Ankleshwar, Gujarat and the leather industry around Kanpur.

With the impact of US tariffs beginning to unfold, the worst is feared for these clusters, especially the MSMEs operating in them. In Tiruppur alone, revenue losses are projected at Rs 12,000 crore and job losses at 3 lakh workers. The seafood industry of Andhra is likely to shed at least 30,000 jobs, with exports to the US no longer competitive with Ecuador. The impact on Surat is likely to be the direst due to the cluster's 50% dependence on the US market: 1 lakh workers are likely to be laid off with order values from America plummeting as we speak.

Most of these clusters have 25-50% exposure to the US, and the Trump tariffs could translate into a revenue loss of 20–75% of turnover, which could lead to job losses of up to a million in the biggest clusters alone.

Therefore, mitigating measures specific to these clusters must get priority rather than generic reforms to boost consumption, or worse, meaningless cant about swadeshi. Hopefully, the GST revisions proposed by the Union Government will include deep cuts or exemptions for these clusters. There is a need for duty drawbacks, interest subvention, and working capital relief for MSMEs, backed up with freight and power subsidies to offset input costs. This is a time for action, not grandiloquence.