Despite the tariff risk, Indian exporters still believe they are more competitively placed than their peers. “Even if it’s 26%, we are still better off than Bangladesh at 35% and China at 30%,” said Sudhir Sekhri, Chairman of the Apparel Export Promotion Council. “Vietnam has 20% plus another 20% if it’s transshipment. Indonesia at 19% is the closest competition.”
The uncertainty has frozen business activity for now. “Our business today is definitely at a standstill because buyers are not clear about what the tariff is going to be,” Sekhri said, adding that US buyers are holding back on orders. European orders have also been affected as Chinese suppliers, facing US tariffs, divert goods to Europe at lower prices.Ajay Sahai, Director General and CEO of FIEO, confirmed that while orders haven’t been cancelled, many are on hold. “I’m not expecting much disruption in exports,” he said, estimating that tariffs in the 20% range would hit company margins rather than supply chains. “Assuming the additional tariff on India comes to 10% and is shared among buyer, seller, and consumer, an impact of 3–4% may be felt on profitability.”
Sekhri added that if tariffs stay within the 20–26% range, US buyers are likely to continue sourcing from India, though with slightly lower volumes. “A person who is buying, say, four shirts every season will probably buy two shirts. So, there is going to be a slight decline in business,” he said, but expressed hope that clarity post-August 1 would unlock fresh orders.
However, concerns are rising over reports that a 36% tariff may be under consideration—26% reciprocal and 10% BRICS-specific. “A tariff of 36% may not be possible for the Indian exporter or the US importer to absorb,” Sahai warned, though he added that the 10% BRICS tariff may be applied across countries, reducing the effective differential for India.
Dasgupta noted that beyond the August 1 deadline, both countries are working toward a broader bilateral trade agreement with the first tranche of negotiations expected to conclude by October. “Even if there is no agreement in the interim, the first tranche could be negotiated, and steps have been taken in that direction,” he said.
Both sides are expected to resume talks in August as part of the sixth round of negotiations.
Below is the verbatim transcript of the discussion.
Q: Do you think India now, in the absence of any kind of interim deal, will have to be ready—prepared for an eventuality where there may not just be 26% reciprocal tariffs, but an additional 10% BRICS tariff as well?
Dasgupta: Of course, we are keeping our fingers crossed as to whether there will be an agreement before the August 1st deadline. But failing that, India could expect something in the region of 20–25% tariffs.
Indonesia has 19%, Vietnam 20%, Japan and Korea 25%, so I think that’s the range. And of course, the Europeans seem to have got 15%. The details of the agreements with Japan, the EU, and Indonesia haven’t come out. It’s also not very clear whether the full written text is available to either side. So, there is a lot of uncertainty. But I think the tariffs, if imposed by President Trump, will hopefully be around 20% or so.
Now, the other thing is that India is negotiating not only against the August 1st deadline, but also the first tranche, which is supposed to be ready by October, and which will cover a very wide-ranging array of subjects on trade. So, President Trump, while making a decision, would definitely bear in mind that even if there is no agreement in the interim, the first tranche could be negotiated, and steps have been taken in that direction.
Q: Mr. Sekhri, how is this impacting your businesses, your exports to the United States? In the eventuality that there is a 25% or 26% tariff, how is business going to be impacted?
Sekhri: We have to see it in the context of what is going to happen with our competition. Our business today is definitely at a standstill because the buyers are not clear about what the tariff is going to be. So, the US buyers are holding back on orders. Our business in Europe is also impacted because of the higher tariffs that the US has imposed on China. A lot of Chinese manufacturers are now selling to Europe at very low prices, so that’s where a lot of European orders are also moving—to China.
Now, coming back to the US context, yes, we definitely look forward to a very fair and equitable tariff for India. What we have been given to understand by government sources is that whatever best the government could offer has been offered, and we cannot do anything better than what we’ve done.
So, given this scenario, we are keeping our fingers crossed. But we believe, based on sources, that it could be anything from 15% to 26%.
Now, as a worst-case scenario, even if it’s 26%, we are still better off than Bangladesh, which is at 35%; we are better off than China, which is at 30%; we are better off than Vietnam, because Vietnam is 20% plus 20% if it’s transshipment. Well, Indonesia is a bit of a competition since they are at 19%, so we stand to lose a little bit there. But my belief is it could be anything between 15% to 26%, but closer to 15% than 26%.
Q: Mr. Ajay Sahai are you seeing buyers holding up or cancelling orders in the run-up to the August 1st deadline? Which sectors, according to you, are most impacted currently?
Sahai: I’m not seeing any cases where buyers are cancelling orders. Orders are on hold—no doubt about it—but large inventory has already been built in the US. In the given context, I’m looking at a tariff in the range of 20%, I’m not expecting much disruption in exports. Probably the bottom lines of companies may be impacted. Even assuming the tariff on India comes to around 20%, we may be worse off compared to some countries. I’m pretty sure that buyers and sellers both will take a call, and both will ensure that the supply line remains intact. So, there’s not much challenge on exports per se. But of course, there are concerns about company profitability, because they may also have to take a hit if some cost-sharing is done. Assuming the additional tariff on India comes to 10% and it is shared among the buyer, seller, and consumer, an impact of 3% to 4% may be felt on the profitability of Indian companies.
Q: Mr. Sunil Sekhri, will companies in the US—your clients in the US—be able to absorb the cost if tariffs are between 20% to 26%? Will exports continue as they are?
Sekhri: The first point I’d like to make here is that people need to wear clothes. So, they will buy clothes. The only thing is that a person who is buying, say, four shirts every season will probably buy two shirts. So, there is going to be a slight decline in business.
However, keeping in mind that our competitors are going to be hit with higher duties—our business from India may not be that impacted. I think people are just waiting for the August 1st deadline. Once things are clear—whether it’s going to be 26% or 20%—I think there’s going to be a flow of orders, and we’re going to have sufficient orders to take us through the spring-summer season, which runs from October 2025 to March 2026.
Q: Mr. Sahai, in case Donald Trump decides to impose a 26% reciprocal tariff plus a 10% BRICS tariff, making it 36%, as some reports are speculating—could that probably hit trade badly?
Sahai: A tariff of 36% imposed on India may not be possible for the Indian exporter or the US importer to absorb it. In that scenario, trade may be impacted. But we also have options for retaliation. As of now, we are only expecting a tariff not more than 26%. We are also looking into the fact that the 10% tariff may be applicable to all countries. So, only the differential of 16% has to be managed by Indian exporters, and US importers will also factor that in.
Sooner or later, India will have a BTA in place, and that’s why both sides would like to retain the supply chain.
