Steep U.S. import levies on India, reaching up to 50%, are prompting Indian businesses to turn to Africa as a production base for exports to the United States.
The tariffs, imposed in response to India’s Russian oil purchases, have particularly hit the automobile and pharmaceutical sectors, forcing companies to seek alternative ways to remain competitive in the American market.
Africa’s appeal lies in its investment incentives, including tax holidays, customs duty and VAT exemptions, and special economic zones.
Countries such as Ethiopia, Nigeria, Botswana, and Morocco are emerging as key beneficiaries, offering Indian manufacturers a viable alternative to bypass U.S. tariffs.
This strategic pivot also highlights India’s growing engagement with BRICS and Africa’s rising role in global trade.
Apparel companies such as GAP Inc.’s supplier Gokaldas Exports Ltd. and premium garment maker Raymond Lifestyle Ltd. are capitalizing on Africa’s favorable trade conditions.
With U.S. tariffs as low as 10% in African countries, compared to the 50% duty on Indian exports, these companies are expanding their African operations.
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Gokaldas Exports’ Managing Director Sivaramakrishnan Ganapathi told Bloomberg in a phone interview, “We will continue to expand in Africa in case of 50% tariffs,” referencing their existing factories in Kenya and Ethiopia, which face only 10% U.S. tariffs.
Raymond Lifestyle is also shifting production to Ethiopia, where labor costs are roughly one-third of India’s.
CFO Amit Agarwal said, “We can obviously shift some of the clients to the Ethiopian factory.”
The broader trade picture is stark.
U.S. duties on Indian imports have risen from 25% to 50%, the highest level imposed on any nation alongside Brazil.
Bloomberg Economics estimates these levies could reduce Indian exports of labor-intensive goods such as jewelry and apparel by up to 90%.
In 2023, India exported over $20 billion worth of textiles, jewelry, and diamonds to the U.S., its largest single market.
Kirit Bhansali, chairman of the Gem and Jewellery Export Promotion Council, warned, “The U.S. 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.”
Meanwhile, rival exporters like Turkey, Vietnam, and Thailand face much lower duties of 15%, 20%, and 19%, respectively, making Indian goods less competitive.
To mitigate the impact, New Delhi has expanded 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.
Trade promotion bodies are also coordinating with exporters to divert goods to alternative destinations, boost 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 harm legitimate trade.
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Image Credit: Economic Times
