Banerjee clarified that the burden of tariffs will not fall on exporters like Pearl Global, but on retailers and brands importing goods into the US. “The tariffs are not paid by us. The buyers, the retailers and the brands, when they import the goods, that’s the time they pay the tariffs,” he said, adding that retailers will likely pass on these additional costs to consumers over the coming months.
Banerjee pointed out that the US apparel import market—valued at $90 billion annually—has significant exposure to countries like China (21%), Vietnam (18%), and Bangladesh (9%). “These numbers cannot be shifted overnight,” he noted.He expects some eventual shift in sourcing to lower-tariff countries, but warned that such realignments would take time. “What will start happening over time is that the countries that have lower tariffs, the brands or the retailers will try to be more exposed to those countries. But those countries have to build up the infrastructure,” he said.
Despite the growing trade tensions, the US continues to be a major market for Pearl Global. While the company has reduced the share of goods it exports to the US from 85% three years ago to below 50% today, around 60% of its customer base remains US-based. Banerjee said this figure will “continue to fall for immediate effect,” but acknowledged that the US, being the largest retail market, cannot be ignored.
Operations in Bangladesh and Vietnam—where Pearl Global has significant manufacturing capacities—are more exposed to US tariffs compared to India. “In Vietnam, we make some specialty products which are not possible to make anywhere else apart from China,” Banerjee explained, indicating the complexity of reorienting production quickly.
While the company remains focused on achieving its ₹6,000 crore revenue target by FY28, Banerjee said the evolving global trade environment could lead to adjustments over time. For now, though, he does not foresee any immediate change in business strategy.
Below are the excerpts of the interview.
Q: What do you make of President Donald Trump’s decision to impose a 26% import duty on India, especially considering the fact that you have a significant manufacturing presence both in Bangladesh and in Vietnam, where significantly higher tariffs have been imposed in comparison to India? But what do you make of this move?
Banerjee: It’s a big step from US President Donald Trump. I think he is redrawing the entire supply chain of the globe. Of course, it’s a start. It’s just a start at this point in time, and a lot of things will happen. As of now, I think the tariffs that have been imposed for all the countries making apparels, that’s going up significantly. And the kind of tariff that has been imposed cannot be mitigated just by changing the supply chain at the drop of a hat. So that means what I’m looking forward to is definitely some kind of inflation that will be passed on or that will happen in the garment prices or the retail prices in the USA.
Q: You have nine manufacturing facilities in Bangladesh, subject to higher tariffs. You have facilities in Vietnam as well, they too are subject to higher tariffs. So relatively, it appears as though Pearl Global is more susceptible to higher tariffs compared to your Indian peers as well. So, what is the percentage of exports you do to the US market from the facilities outside of India? And do all of those exports go mainly to the US markets? And how will you mitigate the impact that you’re going to be seeing from the higher tariffs?
Banerjee: Our share in the US market—that means our goods which are going into the US market is close to about anywhere between 45% and 50%. There are certain global brands which operate out of the US, we are supplying to them. That percentage sits with us at about 60%. But the goods that are going inside the US would be less than 50%.Now, countries like Bangladesh, which had a duty advantage from the GSP advantage that they had for countries like the European Union, UK, Canada, and all, naturally, the business is more from there compared to the US as a market.
If I talk about India, India has been more exposed to the US market. Talking of Vietnam, that would be again more to the US market because in Vietnam, we make some specialty products which are not possible to make anywhere else apart from China. So that’s how our business strategy has been, and that’s how the distribution has been.
Now, talking about the tariff, you have to understand the whole thing. If you look at US statistics, the US imports about $90 billion of apparel. Out of this $90 billion, almost 21% is coming out of China, followed by about 18% which is coming out of Vietnam, and maybe another 9% is coming out of Bangladesh. If you look at this, between these three countries, almost 50% of the goods are going into the USA. And the numbers are substantial.
If you see, China does about close to $18-19 billion worth of goods going into the US. Similarly, Vietnam would be another $16-17 billion, Bangladesh would be another $10 billion. So, this is the kind of FOB that is going in from this chunk of that $90 billion. These numbers cannot be shifted overnight.
Q: I was reading through your previous quarter earnings call, where you had mentioned that, in your order book your share of US-based customers to non-US-based customers—was 65:35. Three years back, it was 85:15. Now, when these tariffs kick in, what does it do to your business, your company in general? Would that number come down further? Would you be turning focus more towards a domestic-focused business? And once these tariffs also kick in—and potentially, if you do have to end up paying higher tariffs for exporting from Vietnam and from Bangladesh—what does that do to your overall projections? Because you had also made a projection that you planned on getting to revenues of around ₹6,000 crores by FY28. What does that do to those targets?
Banerjee: So, I don’t see any immediate change. Of course, there will be a lot of changes that will happen going forward. But for the next two to three months, I don’t see things changing drastically.
The US has to wear garments, and they have to import garments. Unfortunately, or fortunately, whatever you say, 50% to 60% of garments are going from Asia. What will start happening over time is that the countries that have lower tariffs, the brands or the retailers will try to be more exposed to those countries. But those countries have to build up the infrastructure to supply the apparel.
Q: On the back of these tariff impositions, we understand that there could be a certain impact as far as demand is concerned. We also understand that, in order to mitigate the impact, there will be certain price hikes necessary. Do you feel that customers are well-placed to absorb these price hikes? What percentage of the incremental increase in tariffs can be passed on? What is the hit you will have to take to margins, in case you are not able to go ahead and fully pass on the price hikes? And also, for Pearl Global, could you give us a consolidated—or what will be the effective tariff that is applicable to you post this imposition, given the fact that you have multiple facilities across the globe?
Banerjee: First of all, the tariffs are not paid by us. The buyers, the retailers and the brands, when they import the goods, that’s the time they pay the tariffs. Now, let’s say a company in the US is importing goods from us or anybody else—they would be paying this additional tariff. If they are taking the goods from India, the additional tariff comes out to be 26%. If they are taking the goods from, let’s say, another country like China, then it’s 54% additional tariff that they have to pay.
That’s why I was talking about a 45% additional tariff—let’s say is the average from these main manufacturing countries of apparels, that cannot be absorbed by the retailer or the supplier. So, this will be passed on to the consumer.
What portion of it—whether 10% of it, 12% of it, 8% of it—that’s something we will see over the next few months.
Now for a company like Pearl, what should be my mitigation risk? Yes, we have been working—we have already decreased from that 85% dependence on the US market in general—like, in terms of goods going into the US—to below 50% at this point in time. But US-based customers, still we are at 60%, 62% approximately. Now that number will continue to fall for immediate effect, for my benefit, for my company’s benefit. But then, over time, this is the biggest retail market, biggest consumer market. So, I cannot ignore it. We have to be synchronised with what’s happening out there. So, according to me, some of it will be passed to inflation, and the scenario of the supply chain will be redrawn.
