Indian exporters eye Bangladesh as tariff workaround for US market

Bangladesh is among six countries that a section of Indian textile exporters is considering for shifting their final stage of manufacturing to avoid the hefty tariff imposed by the United States on imports from India.

The other countries through which Indian exporters, particularly small and medium enterprises, are mulling to route their exports are Sri Lanka, Ethiopia, Egypt, Indonesia and Jordan.

The development comes as Indian exports began to face as high as 50 percent tariff in the American market from Wednesday after US President Donald Trump slapped a 25 percent punitive tariff due to India's purchases of Russian oil on the goods from the South Asian country.

The tariff has been added to Trump's prior 25 percent tariff on many imports from India, Asia's second biggest economy after China.
It takes total duties as high as 50 percent for goods as varied as garments, gems and jewellery, footwear, sporting goods, furniture and chemicals - among the highest imposed by the US and roughly on par with Brazil and China, Reuters reports earlier.

The escalated tariff threatens India's textile exporters and jobs.

Following the tariffs, some US buyers are demanding additional discounts ranging from 5 percent to 20 percent, said Mukesh Kansal, chairman of CTA Apparels Pvt Ltd in Noida, near Delhi.

Apparel exported from India is sold at three-to-six times the cost in US stores, and even a 10 percent increase in retail price is sufficient to absorb the tariff impact, Kansal was quoted as saying by the Financial Express.

However, with regard to Bangladesh, logistics issues remain after port and transit restrictions were placed by both countries.

As a result, some fabrics that Indian exporters source from China and elsewhere can be sent directly to Bangladesh for processing and re-export, according to industry insiders.

Sanjay Shukla, team leader at Triburg Consulting, which specialises in sourcing garments, said his firm provides services for the apparel, accessories and home products industries with vendors located in India, Bangladesh and Indonesia.

Some of the garment processing can be done by units set up by Indian companies in the countries mentioned, while in other cases the facilities of partners can be used, Shukla added.

Countries like Bangladesh, which face much lower tariffs than India, can emerge as alternative routes for Indian garment exports.
Bangladesh faces a 20 percent tariff, Indonesia 19 percent, and Sri Lanka 30 percent.