The chemical industry in Gujarat, which has been among the largest exporters to the US, has also become a victim of the new US tariffs and without exports, the industry was virtually at a standstill, causing an even greater panic of recession along the Gujarat industrial zone.
As per the trade sources, the United States has recently imposed tariffs of up to 25 – 30 per cent on different categories of Indian chemical products such as dyes, intermediates and specialty chemicals. The abrupt increase has made exports of Gujarat, which produces almost 60 per cent of the entire output of chemicals in India, uncompetitive in the American market.
According to industry insiders, the number of export orders in the United States has significantly reduced since the new tariff structure was instituted. A top official of the Gujarat Dyestuff Manufacturers Association said that most American customers have either blocked or abandoned orders in the last two months. This has resulted in a tremendous fall in production, factory closure and job losses in small units.
The largest chemical centres of Gujarat, such as Ankleshwar, Vapi, Dahej, and Bharuch, are experiencing dismal downturns. Several small and medium enterprises (SMEs) that are largely reliant on exports are working at low volumes or have gone out of business. Analysts caution that unless the situation is checked, the industry can face its worst recession in the last 10 years.
The action of the US is thought to be in its overall trade policy to impose mutual tariffs on Indian goods. The action taken by Washington was in response to the Indians’ decision to trade with Russia and to increase its quantities of exports to the US market. In the past, the Indian chemical exports were only given 1-3 per cent duties on import, but the new tariff regime has increased the costs by almost 25 percentage points, and this has cost India its price edge.
According to economists, these effects of this tariff shock may have a spill-over effect in the economy of Gujarat on transporters, suppliers of raw materials and on thousands of workers who work in this sector. The manufacturing industry of Gujarat is anchored on the chemical industry. This may cause a long-term slowdown in the state revenues and jobs, as economist Dr Mehul Shah of Ahmedabad University puts it.
To address the crisis, the Indian government is also said to be considering relief policies and export subsidies to the hit industries and is in talks with the US in the tariff cut talks via diplomacy.
Analysts underline diversification of export markets and raising domestic consumption as the means to soften the impact. But, until the hour, chemical exporters in Gujarat are kept on their toes, the production lines are slowed down, and the stores are congested with products that have not been sold.
