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Exporters eyeing new opportunities in the US market amid high tariffs of up to 245 per cent on China must proceed with caution, warns a new report by the Global Trade Research Initiative (GTRI).
The sharp rise in US tariffs on Chinese goods--up to 245 per cent--has opened a window for other countries like India, which has a much lesser tariff of 10 per cent at least till July 8, but the path is not without traps. The report said "With Chinese exports facing tariffs as high as 245 per cent, while most other countries continue to enjoy just 10 per cent duties, this sharp tariff gap as a major disruptor of global trade flows. This disruption is prompting companies to rethink sourcing strategies, giving rise to three distinct trade models, each with different implications for exporters". The report highlighted that simply rerouting Chinese goods through countries like India or Vietnam to avoid tariffs is risky and illegal. Such practices violate US sourcing rules and can lead to heavy penalties. US Customs checks whether a product has truly changed during manufacturing. If not, even goods assembled outside China can still be taxed like Chinese products. To benefit from the tariff gap--where most other countries face only a 10 per cent duty-- the report mentioned that the exporters must ensure that their products undergo "substantial transformation." GTRI also added that this means real value addition, such as integration, design, or programming. Basic assembly or repackaging is not enough. It said, "Simply assembling goods is not enough--true manufacturing transformation must occur". The most sustainable model, according to GTRI, is to build manufacturing hubs outside China. Countries like India, Vietnam, Mexico, and others are seeing interest from global companies looking to shift supply chains. These shifts are especially strong in sectors like garments, pharmaceuticals, toys, electronics, and chemicals. India, in particular, stands to gain in APIs, textiles, leather, and home goods--if it follows the rules. The report advised the exporters to track their supply chains closely, document each step, and even apply for a binding ruling from US Customs to avoid surprises. The report concluded that the export opportunity is real and significant--but shortcuts won't work. Long-term gains will come only to those who invest in genuine manufacturing, understand U.S. rules, and build transparent, compliant supply chains. (ANI)
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