US tariffs reduce to 10%, exporters stay nervous

NEW DELHI: Indian exporters are finally breathing easy with goods entering the US on payment of 10% additional tariff from Monday, instead of the 25% that was applicable since the start of the month.

But there is also anxiety over how long this rate will continue given US president Donald Trump's mercurial turns over tariffs. Early on Saturday, he had announced his intent to increase the levy to 15%, although the executive order is yet to be issued.




On Monday, US Customs and Border Protection agency notified shippers that the rate would be 10%. A White House official told Reuters that Trump has had "no change of heart" in his desire for 15% tariff but offered no details. Following US supreme court striking down his authority to impose reciprocal tariffs, Trump invoked section 122 of the Tariff Act 1974 to levy 10% additional tariffs, citing balance of payments problems. The provision can be used only for 150 days.

Exporters are keeping their fingers crossed.

"Let things stabilise, there are a lot of ifs and buts. There is a lot of uncertainty. Some clarity is required on diamonds given that they were treated differently under the agreements with the UK and EU," said The Gem & Jewellery Export Promotion Council executive director Sabyasachi Ray.

The confusion and the flip flop by Trump meant that some of the diamond consignments were held back as "even the US customs didn't know what the final levy was. So, we sent some stuff today, but the duty is quite high," said a Mumbai-based exporter.

Lower tariff provision only for 150 days

The provision can only be used for 150 days. "Let things stabilise. There is a lot of uncertainty. Some clarity is required on diamonds given that they were treated differently under the agreements with the UK and EU," said Gem & Jewellery Export Promotion Council executive director Sabyasachi Ray.

The confusion and the flip flop by Trump meant that some of the diamond consignments were held back "even the US customs didn't know what the final levy was. So, we sent some stuff today, but the duty is quite high," said a Mumbai-based exporter.

For jewellery, a 5.5% MFN tariff is applicable to all countries and so is the 10% additional duty. Besides, with Chinese exports facing action under section 301, Ray said, some goods from across the border face 25% additional tariff.

For most other sectors, the reduction is a reason to cheer as exports from the country were subject to 50% tariffs, including a 25% penalty for purchase of Russian oil by Indian refiners. Although the 25% penalty was removed at the start of the month, the remaining levy was to come down to 18% as part of the interim framework for a bilateral trade deal.

"The 10% US tariff, though a concern, is significantly lower than the higher duties Indian exporters have faced earlier, placing them in a relatively better position. Since it is applied uniformly across countries, our competitive standing remains largely unaffected. A supportive exchange rate further cushions the impact, enabling exporters to remain resilient and competitive in the US market," said Fieo director general Ajay Sahai.

While goods such as pharma and electronics were exempt from additional tariffs during the days of reciprocal tariffs, there are others such as aluminium, steel and automobiles and auto parts that will continue to face 50% product-specific levy under section 232. "The million-dollar question now is on refunds and if we will ever be able to get it," said EEPC India chairman Pankaj Chadha. In case the refunds do come, the challenge for exporters will be getting them from the buyers, when most do not have any agreement on that.