US Buyers Seek Discounts, New Export Orders Frozen Amid Rising Tariffs: Impact on Indian Exporters and Global Trade Dynamics

The imposition of reciprocal tariffs by the US, effective since early April 2025, has sent ripples through the global trade ecosystem, with Indian exporters notably feeling the pressure. US buyers are aggressively seeking discounts of up to 25%, while new export orders from the world’s largest economy have come to a virtual standstill. This development has sparked concern among Indian exporters, government bodies, and trade experts about the short- and medium-term future of exports to the US, a vital market for India.

US Tariffs Spark Freeze on New Export Orders

The US government’s announcement of reciprocal tariffs—imposed in retaliation for previous Indian trade restrictions and tariffs—has created significant uncertainty. These tariffs, some reaching as high as 26%, have caused US buyers to reassess their commitments, resulting in a freeze on fresh export orders from India.

• Buyers are demanding steep discounts on existing contracts, often around 20-25%, to offset the impact of additional duties.
• New orders have largely been put on hold as importing companies conduct fresh cost assessments.
• Manufacturers and exporters face the difficult decision of how to bear or pass on tariffs to maintain market share.

Pankaj Chadha, chairman of the Engineering Export Promotion Council, emphasized that business with the US has dropped sharply, with margins in single digits being insufficient to absorb the new tariffs on products ranging from steel and aluminum to other engineering goods[1].

The freeze is significant given that the US accounts for approximately 20% of India’s engineering exports, valued at around $20 billion. The sector alone represents a quarter of the country's total exports—highlighting the tariff impact's far-reaching implications[1].

Sector-Wise Impact: Engineering, Apparel, Leather, and More

The tariffs have had a varied impact across sectors:

Engineering Goods

• Heavy hit due to 25% tariffs on steel and aluminum from March 12, extended to other engineering products from April 2.
• Exporters face severe margin pressures, with limited capacity to absorb the cost increase.
• New order placements have stalled, and existing contracts are under scrutiny for cost-sharing agreements.

Apparel Exports

• Apparel exporters have reported requests for 20-25% price concessions from US buyers.
• Margins in the apparel industry are already thin, making discounts difficult.
• Industry representatives have petitioned the Indian government for a grace period of 30-40 days to process existing orders before implementing new tariffs' effects.
• The Apparel Export Promotion Council has urged the government to consider a market diversification fund and enhanced export promotion incentives[1][2].

Leather and Marine Products

• Exporters have begun dialogue with US buyers regarding sharing losses due to tariffs.
• Some buyers have requested production halts to manage inventory under the new cost dynamics.
• Marine exports, including fish and crustaceans, are projected to decline sharply, with estimates suggesting a 20% drop in exports to the US[2].

Other Affected Segments

• Vehicle and auto parts exports expected to decrease by over 12%.
• Electrical, telecom, and electronic product exports projected to fall by 12%.
• Declines also forecasted in plastics, carpets, petroleum products, organic chemicals, and machinery[2].

Exporters Seek Government Support and Market Diversification

In response to the tariff shock, Indian exporters have turned to the government, requesting relief measures that include:

• Additional fund allocations targeted at export promotion.
• Reduced interest rates on export loans.
• Expansion of export credit insurance to cover pending and prospective deliveries.
• Tweaks in production-linked incentive (PLI) schemes, especially for textiles, to encourage capacity augmentation and investment.

Officials from the Apparel Export Promotion Council and the Federation of Indian Export Organisations have highlighted the urgency of these interventions to maintain competitiveness against other emerging countries[2].

India’s competitors in the US market, including China, Vietnam, South Korea, Malaysia, Bangladesh, Kenya, Japan, Ecuador, and Turkey, may gain an advantage due to lower tariffs, potentially eroding India's market share in the medium term[2].

Projected Export Declines and Strategic Outlook

According to the Global Trade Research Initiative (GTRI), India could see a reduction of exports to the US by approximately $5.76 billion (6.41%) in 2025. This projection underscores the tariff impact’s severity, especially concerning:

• Iron and steel articles (-18%)
• Diamonds, gold, and related products (-15.3%)
• Various industrial and consumer goods experiencing significant slowdowns[2].

Despite this, some sectors like non-knitted apparel showed growth in 2024, indicating that long-term opportunities remain if tariff issues are resolved and market access stabilized[2].

Broader Global Impact: Similar Challenges for China and Other Exporters

The impact of US tariffs extends beyond India. At China's largest trade fair, exporters reported frozen orders from the US, with many fearing for survival amid the tariff escalation[3]. Chinese exporters have resorted to domestic discounts and appeals to patriotic consumers to clear stock intended for the US market, which now faces tariffs upwards of 145% on many Chinese goods[4].

Chinese government-backed e-commerce platforms have launched funds to aid exporters in shifting sales to the domestic market. This shift highlights how export-dependent economies are forced to recalibrate strategies in response to rising trade barriers[4].

What Lies Ahead? Challenges and Opportunities

Bilateral Trade Agreement (BTA) Hopes

Indian exporters and policymakers are pinning hopes on ongoing negotiations for a Bilateral Trade Agreement between India and the US. The BTA could potentially reduce tariffs and help restore smoother trade flows, creating new opportunities for exporters[1].

Short-Term Market Freeze, Long-Term Realignment

• In the immediate term, US buyers appear likely to maintain a cautious stance, with minimal new orders expected through May 2025.
• Exporters must navigate a challenging environment of renegotiations and cost-sharing arrangements.
• Market diversification efforts and government support will be critical to offsetting the tariff shock.

Importance of Strategic Export Incentives and Capacity Building

• Proposals to ease PLI scheme criteria and expand the product basket aim to boost competitiveness.
• Exporters need intensified government backing to compete against countries benefiting from lower tariffs in the US.
• Increasing domestic value addition and improving supply chain efficiencies will be key to improving margin resilience.

Conclusion

The freeze in new US export orders against a backdrop of rising tariffs represents a significant challenge for Indian exporters. While the immediate future looks cautious, with buyers demanding discounts and halting orders, strategic government interventions and trade negotiations offer a pathway to recovery. To maintain and grow their foothold in the competitive US market, Indian exporters must adapt swiftly, leveraging policy support and exploring diversified markets.

The evolving dynamics of US tariffs underscore the complex interplay between global trade policies and the economic livelihoods of millions engaged in export industries. Monitoring trade developments and proactive policymaking will be essential in shaping India’s export resilience in 2025 and beyond.

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Keywords: US tariffs 2025, Indian exporters, export orders freeze, reciprocal tariffs, US-India trade, export discounts, bilateral trade agreement, apparel exports, engineering exports India, export credit insurance, market diversification, Global Trade Research Initiative, trade war impact, export sector challenges.

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Current Date: Thursday, April 17, 2025.