Leather exporters in the city are considering shifting their manufacturing operations overseas to retain access to the US market after the Donald J. Trump administration implemented a punishing 50% tariff on Indian exports.
The steep tariff, which took effect on Wednesday following a US Department of Homeland Security notification on Monday, threatens massive job losses in both the leather and seafood export sectors during what should be their busiest season preparing for Christmas orders.
More than 21% of leather goods from eastern India — including industrial gloves, bags and wallets — are exported to the US, while the majority of Bengal’s shrimp exports also head to American markets.
Production halt
At Calcutta Leather Complex in Bantala, production has slowed dramatically for exporters whose primary market is the US. Kevin Juneja, managing director of JC International Ltd, said barely 12 of his 30 leather cutting machines were operational on Wednesday.
“We had already seen a 50% drop in US orders since March this year. Now all orders to the US are on hold, and intense negotiations are ongoing between exporters and importers about how to split the additional costs,” said Juneja, whose company sends half its production to America.
“We have to look at setting up operations in countries like Cambodia or Sri Lanka to avoid the steep tariff. We can’t afford to lose the US market,” he said.
For exporters and importers who had desperately hoped the Trump administration would reverse course, reality is now setting in.
“No retailer wants empty racks in their stores, so they will look to other suppliers,” Juneja said.
His company had been on a growth trajectory since 2018, when Trump’s initial tariffs on China diverted orders to Indian manufacturers. The firm had hired additional workers, brought in UK consultants to design products for the US market, and purchased land for expansion — a project now stalled indefinitely.
“We’ll have to sell existing stock at a loss, but this cannot continue forever,” Juneja said. US importers are demanding heavy discounts while holding off on new orders typically placed in February, May, August and November.
Containers stranded
The ripple effects extend throughout the supply chain. New Horizon and Industrial Safety Products, which together export 4 million pairs of industrial gloves annually with 25% destined for the US, have all orders on hold.
“US importers aren’t cancelling orders, but are preferring to wait and watch,” said owner Gopal Kumar Naregi.
Several containers of raw leather imported from Brazil now sit stranded at Calcutta port due to lack of orders.
Zia Nafis of Nafis Tanning Industries, who serves on the Council of Leather Exports’ regional committee, noted that even though European countries are also buyers, the US represents the biggest export market from eastern India.
“Exploring new markets is difficult because demand in France and Italy has also dropped this time,” Nafis said.
Seafood storm
Seafood exporters are equally alarmed as they enter their peak season. September and October typically see massive orders from US supermarkets stocking up for Christmas, with Indian shrimp comprising the majority of America’s shrimp imports.
“It will take a week to 10 days to understand who will absorb the additional expenses,” said Rajarshi Banerji, president of The Seafood Exporters’ Association of India’s Bengal region. “As of now, nobody in the value chain can absorb 50% additional expense.”
The situation has worsened progressively. Over the past two years, the US had already imposed additional duties totalling more than 8%, bringing the total tariff impact to over 58%.
From Bengal alone, seafood exports worth approximately ₹7,000-8,000 crore go worldwide annually, with ₹5,000 crore heading to the US. Since May, only a few exporters managed shipments to America after tough negotiations with importers.
“For the last couple of weeks, there have been no shipments to the US. Everything is on hold,” Banerji said.
Limited options
While exporters scramble to find new markets in Japan, Vietnam, China and the European Union, the alternatives present their own challenges.
“China has payment issues, and the other countries cannot absorb the volumes,” Banerji noted, highlighting the difficulty of replacing America’s massive market overnight.
The timing couldn’t be worse for both industries, which typically gear up exports to the US and Europe during this period for the crucial Christmas shopping season.