From exports to domestic sales: Can US-standard goods find buyers in India amid tariff shock?

President Donald Trump's decision to impose a 50% tariff on Indian exports has dealt a major blow to several industries, including textiles, apparel and handicrafts, gems and jewellery, marble and carpets, chemical and auto components, as well as food & beverages. The move has triggered fear of livelihoods and job losses among millions of Indian manufacturers, artisans, and distributors who depend heavily on supplying US-based companies.

A Ludhiana-based exporter of bags and apparel told Storyboard18, "We are in a wait-and-watch period right now, hoping it's only a temporary setback and that our government will soon find a solution".

According to the Indian government's estimates, exports worth $48.2 billion will be hit by the US tariff hike.

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Just a few months ago, China faced a similar trade shock when the Trump administration imposed a 145% tariff on Chinese exports. In response, Chinese suppliers flooded the internet with videos showcasing how they manufactured products for luxury brands such as Louis Vuitton, Estee Lauder, and others. They then offered to sell similar, unbranded products to consumers at one-tenth the market price by breaking down the cost structure to justify their offers.

'Emulation as a solution?'

A large number of US brands, such as, Levi's, Nike, GAP, Softline Brand Partners, Gunas, outsource to Indian suppliers that meet American quality standards. Amid the current crisis, experts suggest that Indian manufacturers and artisans could emulate the Chinese strategy, though results may not be immediate.

"I see a great opportunity for the enormous pool of talent that India has... that we will convert adversity into opportunity. We will build great global brands out of India," said brand strategist and columnist Suhel Seth.

Citing homegrown success stories like Tata's acquisition of Jaguar Land Rover and Mukesh Ambani's launch of Jio, Seth said it was time Indians stopped being "squeamish" about taking their brands global. Maruti Suzuki India Chairman RC Bhargava echoed this sentiment: "It is our duty as Indians to do our very best to promote and maintain our dignity and respect and not give in to any kind of bullying in this matter... the nation has to stand united".

Lloyd Mathias, angel investor and independent director, however, warned that without strong branding, tariff-hit products will lose much of their value.

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"Indian consumers have an appetite for brands more than for just quality products," he noted.

Mathias highlighted a stark difference between the Indian and the US luxury market, saying, "India's luxury and high-end goods market is growing, but it's still a tiny fraction of the global market. India accounts for less than 2% of global luxury sales--about 10 million people can afford the true luxury in the country, while the rest buy from street-side brands. In comparison, out of the US's 350 million people, around 200 million can afford such products.

While the idea to create a platform to promote tariff-hit Indian goods existed earlier, Mathias said that the urgency is far greater now.

Harish Bijoor, Business & Brand Strategy Specialist and Founder of Harish Bijoor Consults Inc, agreed such pro-exporters initiatives would be long-term plays, requiring 6-8 years to generate returns comparable to exports. "A platform like this can help build high-quality products for India's large consumer market, but asymmetry in distribution remains a big challenge," he said.

'Ground realities'

Some makhana (Fox nut)exporters have already tried launching their own brands, but have struggled due to the price sensitive nature of the Indian market.

"Many exporters I know have slowly transitioned to building their own brands for India. Initially, they were purely export-focused, but gradually, they began participating in exhibitions and testing the domestic market. Selling high-end products in India is a tough job because of intense competition. The transition will be slow, but let's see how it pans out," said Rishabh Jain, founder of Mr Makhana. India is also a major exporter of makhanas to the US, with Bihar alone sending 600 tonnes in 2024.

Similarly, natural and lab-grown diamond exporters are also cautious following the tariff hike.

Nipun Kochar, founder of lab grown diamond brand JewelBox, said that Indian jewellery has long met US standards, and the quality at the local level remains at par with export. "All modern techniques of CAD production and direct casting are being used. The finishing and filing standards are also maintained so that the final output matches global benchmarks," he said.

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However, Kochar pointed out that the US is far ahead in lab-grown diamond consumption. "In India, the lab-grown diamond account is still at a nascent stage, accounting for just 1-1.5% of total diamond sales, while in the US, about 58% of engagement rings use lab-grown diamonds. So a domestic platform won't help much in this category yet," Kochar explained.

For natural diamonds, too, Kochar said it will take time for India to catch up. "The US market is simply larger, with higher margins. Retailers there can sell at a premium, creating a 30-40% price difference compared to India".

Vipul Shah, former Chairman at The Gems & Jewellery Export Promotion Council, added, "Such platforms can offer some protection to artisans and manufacturers, but only on a small scale. The loss from the US market is enormous. Compensating for it will require new investments, fresh markets, and government support. Nothing will change overnight".

Mathias agreed that while high-quality Indian products can find takers at home, the domestic market will absorb only a fraction of the overall loss.

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Building something like this will take time, but factories and workers cannot afford to run on slo-mo till then," said Dr. Sandeep Goyal, Chairman, Rediffusion. Goyal cautioned that marketing tariff-affected products through such a platform cannot serve as an effective substitute for lost exports.

Ultimately, while exploring ways to ease the impact of tariffs is crucial, industry leaders agree that India faces a challenging journey ahead. Sustained effort, investment, and innovation are needed to turn adversity into opportunity.