Traders in export-focused sectors wary of Donald Trump's tariff threats

Traders across export-focused sectors with a significant business presence in the United States say they are apprehensive of growing noises from Washington DC for higher import tariffs.

India’s export exposure in sectors such as diamond jewellery, pharmaceuticals and marine products with regard to the US remains far higher than steel and aluminium exports, which have attracted US President Donald Trump’s ire. 

The US alone consumes about 30 per cent of India’s annual jewellery exports and 40 per cent of shrimps and prawns. About 40 per cent of all pharma exports also end up stateside. The US is India’s largest export destination, with $42.21 billion worth of shipments sent to that country in 2016-17. 

“We will be meeting with Commerce Secretary Rita Teaotia and other top officials of the ministry tomorrow (Wednesday) to discuss the US issue,” said Ganesh Kumar Gupta, president of the Federation of Indian Export Organisations.

While China has mostly been on the receiving end of Trump’s trade barbs, the US president raised again last week the issue of Harley-Davidson attracting “unfair” import taxes in India. In case the Trump administration decides to pursue country-specific tariff hikes on industrial and consumable commodities, its disastrous impact could be first felt on India’s diamond jewellery exports worth $40 billion. The jewellery demand from the US sets the tone for the rest of the world and indirectly contributes a lot towards India’s overall export growth in the sector, according to traders.

“Trump has not talked anything about jewellery. But any country-specific import duty levy or increase in the existing tax could be disastrous for India’s diamond jewellery exports,” said Praveen Shankar Pandya, former chairman of the Gems and Jewellery Export Promotion Council.

Source: Ministry of Commerce and Industry

Currently, processed non-industrial diamonds, for which the US is the largest overseas market, attract nil duty there. India’s processed diamond exports to the US were valued at $7.36 billion during 2016-17, or about 30 per cent of the overall diamond exports that year. On the other hand, India’s export of diamond-studded gold jewellery worth $1.42 billion for 2016-17 attracted 5.8 per cent of import duty. 

“No country in the world today takes a country-specific decision on import duty, unless the exporting nation indulges in unfair trade practices. Hence, Trump is unlikely to take any such decision either. In case he does, the impact would be severe on the Indian diamond processing industry,” said Pandya. 

While some underdeveloped countries have been given preferential treatment under the World Trade Organisation (WTO) guidelines, India’s position as the fastest-growing economy excludes it from this category. 

Exporters of Indian pharmaceuticals, whose merchandise worth $5 billion reached the US in 2016-17, however, say it is unlikely that the Trump administration will act tough on them as the country requires cheap drugs. But the industry would be in a tight spot if tariffs are revised upwards, as the Indian pharmaceutical industry, dependent on the manufacture of generics, earns almost 50 per cent of its revenues from exports. Firms say they should not be a target since some players have started manufacturing in the US as well.

Pressure from local industries is another area of concern. US-based shrimp producers’ bodies such as the Southern Shrimp Alliance continues to advocate restrictions on imports, either via higher duty or through non-tariff barriers like the Seafood Import Monitoring Program regulation. 

It doesn’t help that India is also the largest exporter of shrimps to the US with more than 32 per cent of all shrimps consumed in the US in 2017 originating in India. This translates into $2.17 billion worth of Indian shrimps hitting the US shores. 

The reduced national average of anti-dumping duty for India at 0.84 per cent remains an important contributor to the US being the top destination for Indian shrimp exports. “Trump is a non- issue so far. Any increase in duty would definitely harm us, but I doubt if shrimps will be in the list,” said Aditya Dash, managing director, Ram’s Assorted Cold Storage Ltd, a leading exporting company based in Odisha. “The harm will be for the American consumers who enjoy eating Indian shrimps,” he added.