Washington’s steep import levies on India, reaching up to 50%, have prompted Indian businesses to explore Africa as a production hub for exports to the US.
- Washington has raised tariffs to a maximum of 50% on Indian exports due to geopolitical factors, significantly impacting India’s trade sectors.
- Faced with these challenges, Indian companies are considering African nations as alternative production locations to remain competitive in the US market.
- African countries, including Kenya, Ethiopia, and Morocco, provide tax and customs incentives that reduce operational costs for international businesses.
- India is actively engaging with Africa within the framework of BRICS and exploring strengthened trade partnerships to navigate evolving global trade dynamics.
Washington’s steep import levies on India, reaching up to 50%, have prompted Indian businesses to explore Africa as a production hub for exports to the US.
The tariffs, imposed due to India’s Russian oil purchases, have particularly affected the automobile and pharmaceutical sectors, forcing companies to find new ways to remain competitive in the American market.
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Africa’s appeal lies in its attractive incentives, including tax holidays, customs duty and VAT exemptions, and special economic zones. Countries such as Ethiopia, Nigeria, Botswana, and Morocco are well-positioned to benefit from India’s shift, offering a viable alternative for manufacturers seeking to bypass US tariffs.
This strategic move underscores India’s growing engagement with BRICS and Africa’s emerging role as a key player in global trade.
Apparel giants like GAP Inc.’s supplier Gokaldas Exports Ltd. and premium garment maker Raymond Lifestyle Ltd. are capitalising on Africa’s favourable trade terms. With US tariffs as low as 10% in African countries, compared to the 50% duty imposed on Indian exports, these companies are expanding their African operations.
Gokaldas Exports’ Managing Director Sivaramakrishnan Ganapathi told Bloomberg in a phone interview, “We will continue to expand in Africa in case of 50% tariffs,” highlighting their existing factories in Kenya and Ethiopia, which face only 10% US tariffs.
Raymond Lifestyle is also shifting production to Ethiopia, where labour costs are roughly one-third of India’s. According to CFO Amit Agarwal, “We can obviously shift some of the clients to the Ethiopian factory.”
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The Bigger Trade Picture
Indian companies are under pressure due to Washington’s decision to hike duties on Indian imports from 25% to 50%, the highest tariff level imposed on any nation alongside Brazil. According to Bloomberg Economics, these US levies could slash Indian exports of labour-intensive goods like jewellery and apparel by up to 90%.
In 2023, India exported over $20 billion worth of textiles, jewellery, and diamonds to the US, its single largest market. However, the new tariffs risk more than halving these flows.
Kirit Bhansali, chairman of the Gem and Jewellery Export Promotion Council, highlighted the severity of the situation: “The US is our single largest market, accounting for over $10 billion in exports, nearly 30% of our industry’s total global trade. A blanket tariff of this magnitude is severely devastating for the sector.”
The pain is compounded by rival exporters like Turkey, Vietnam, and Thailand facing much lower duties of 15%, 20%, and 19%, respectively, making Indian goods less competitive.
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Diversifying Beyond the US
To counter the impact, New Delhi has widened its export focus from 20 countries to 50, including key markets in West Asia and Africa. Officials from India’s commerce and industry ministry confirmed that a product-by-product review is underway to identify competitive advantages and reposition exports.
“The idea is to tap the top 50 countries and look at each product and the competitors. India must mitigate risks to improve manufacturing and export competitiveness,” an official told the Economic Times.
Meanwhile, trade promotion bodies are coordinating with exporters to divert goods to alternative destinations, expand domestic consumption, and explore lower-tariff routes through countries such as Mexico, Canada, Turkey, UAE and Oman. However, Bhansali cautions that such diversions could undermine transparency and hurt legitimate trade.
Olamilekan Okebiorun
BI Africa Contributor
