A big part of India’s economy is facing a nightmare scenario. On Aug. 27, the extraordinarily high tariff of 25 percent that President Trump imposed on its exports to the United States is set to double. Businesses that were viable are bound to go bust quickly as orders dry up.
“We were shocked with the 25 percent tariff, and thinking about how to meet this problem, how to face this,” said Ishtiaq Ahmad Khan, a fourth-generation carpet maker in Bhadohi, in the giant state of Uttar Pradesh. “But now it’s 50 percent, so it became impossible. We’re afraid that a lot of people will be unemployed.”
Carpetmaking is a big business in India, with 98 percent of the product shipped overseas. Hand-tufted carpets form the bulk of the trade, whereas Persian-style hand-knotted rugs are the most valuable. In recent years nearly 60 percent of that stock has gone to buyers in the United States. For American importers, that $500 rug now comes with a $125 tariff and possibly a $250 one.
Bhadohi is at the heart of north India’s carpet belt, home to hundreds or thousands of manufacturers like Mr. Ishtiaq’s company, Ajaz Carpets. They eke out their profits, so they don’t have the means to absorb the giant price increases their American customers now face. Mr. Ishtiaq, who led the industry’s trade promotion council, estimates that 2.5 million people who live in the region could be plunged into subsistence-level poverty.
Other industries in line to face unbearable wipeouts include textiles and garments, aquaculture — mainly farmed shrimp — and furniture. They are not India’s flashiest businesses, but together they employ many millions of workers, and the billions they earn have helped keep India financially strong during periods of crisis.
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