MUMBAI/NEW DELHI, Aug 26 (Reuters) - Indian exporters
are bracing for disruptions after a U.S. Homeland Security
notification confirmed Washington would impose an additional 25%
tariff on all Indian-origin goods from Wednesday, ramping up
trade pressure on the Asian nation.
Indian exports will face U.S. duties of up to 50% - among
the highest imposed by Washington - after President Donald Trump
announced extra tariffs as punishment for New Delhi's increased
purchases of Russian oil earlier in August.
The new duties will apply to goods entering the U.S. for
consumption or withdrawn from warehouses for consumption from
12:01 a.m. EDT on Wednesday or 9:31 a.m. IST, according to the
Homeland Security notice.
The Indian rupee weakened 0.2% to 87.75 per U.S. dollar in
early trade, even as the greenback declined against many other
currencies. The benchmark equity indexes and
were each trading 0.8% lower.
The notification said exceptions would include in-transit
shipments with proper certification, humanitarian aid, and items
covered under reciprocal trade programs.
The notification reiterated that the action was in response
to India's indirect support of Russia's military incursion into
Ukraine.
India's Commerce Ministry did not immediately respond to an
email seeking comment on the latest notification.
"The government has no hope for any immediate relief or
delay in U.S. tariffs," said a Commerce Ministry official, who
spoke on condition of anonymity because they were not authorised
to speak to media.
Exporters hit by tariffs would be provided financial
assistance and encouraged to diversify to alternative markets
including China, Latin America and the Middle East, the official
added.
"The government has identified nearly 50 countries for
increasing Indian exports, particularly of textiles, food
processed items, leather goods, marine products."
Indian Prime Minister Narendra Modi has vowed not to
compromise the interests of the country's farmers even if there
is a heavy price to pay. Modi is also taking steps to improve
ties with China with his first visit in seven years planned for
the end of the month.
EXPORTERS SEEK AID
Exporter groups estimate hikes could affect nearly 55% of
India's $87 billion in merchandise exports to the U.S., while
benefiting competitors such as Vietnam, Bangladesh and China.
"The U.S. customers have already stopped new orders. With
these additional tariffs, the exports could come down by 20-30%
from September onward," said Pankaj Chadha, president,
Engineering Exports Promotion Council.
Chadha added that the government has promised financial aid
including increased subsidies on bank loans and support for
diversification in the event of financial losses.
"However, the exporters see limited scope for diversifying
to other markets or selling in the domestic market," he said.
Private sector analysts warn that a sustained 50% tariff
could weigh on India's economy and corporate profits - prompting
the steepest earnings downgrades in Asia - even if proposed
domestic tax cuts partly cushion the blow.
Capital Economics said last week that if full U.S. tariffs
come into force, the hit to India's economic growth would be 0.8
percentage points both this year and next.
Foreign Minister S. Jaishankar said last week trade talks
are ongoing and that Washington's concern over Russian oil
purchases was not equally applied to other major buyers such as
China and the European Union.
There is no directive from the government so far regarding
oil purchases from Russia. Companies will continue to buy oil on
the basis of economics, three refining sources said.