The Human Cost of Trump's Tariffs

0:07Hello and welcome to The Debrief from the Business of Fashion, where each week we delve into our most popular BIOAC professional stories with the correspondents who created them. I'm senior correspondent Sheena Butler-Young. And I'm executive editor Brian Baskin. Every autumn, the buzz of sewing machines in India's largest apparel manufacturing hubs begins to wind down as workers head home for Diwali. This year, that exodus came early. After the U.S. slapped India with a surprise 50 % tariff in late August. Order stalled, factories shuttered, or they cut shifts. Thousands of workers were essentially told to come back when things in America got better.

0:47For people living week to week, a month without wages can be the difference between coping and crisis. Today we're asking, how did a Washington trade decision ricochet so fast through India? And what can brands, factories, and governments do now to help workers who are carrying the heaviest load? Joining us is BOF reporter Shaiza Walid, who's been reporting on the tariff impacts in India since they came into effect in late August. Shaiza, welcome to The Debrief. Thank you. Hi, Sheena. Hi, Brian. It's such a pleasure to be here. So let's start with the policy. As Brian described, a 50 percent tariff is massive.

1:21Can you walk us through what exactly triggered it? And essentially, it's a punitive tariff, right? So why did the U.S. choose to punish India in this way? So the tariff that came into place in the end of August on the 27th to be exact, it doubled an existing duty on Indian goods from 25%. That was kind of the number that was put out there in the summer to 50%. And that penalty was linked to India's continued purchases of Russian crude oil. And in fact, in India itself, they call it a 25 % tariff and then the 25 % Russian oil penalty. That's how they separate it. And then the joint is a 50. But yeah, that's essentially why factories started kind of paying the price for it.

1:59It hit very fast because brands kind of immediately reacted to it once the 50 percent came into place and it would left factories, you know, half filled. There was no clarity for workers. And it's worth noting here that the first 25 percent, that was part of the Liberation Day tariffs. And, you know, they were levied against a lot of countries. And that one was expected, right? Maybe not that high, but it was expected. And then this one in August came totally out of the blue, right? Exactly. In fact, a lot of factories were, because they knew that 25 % was already there, they were all preemptively planning for that.

2:31So this one was a major shock. And when it happened, the reactions kind of came in a way that was, people were kind of digesting the information. There was a mix of like panic and shock. And what do we do next amongst manufacturers, big and small? I remember Mark Bain we had on the debrief and he described like some of the Liberation Day tariffs as like, in effect, a ban. Is that sort of how it was felt in India? Did it feel like an import ban? I think it started to feel more like to them that they were being punished for something that they didn't have any hand in. And it felt like everybody I've spoken to from label organizations to kind of large factory owners, what they've said is kind of they feel that sentiments that play out in Washington, D.C.

3:12gets to decide whether or not they get to send more goods and make a profit. it. And I think for them, it was this fact that they have to absorb the pressures and brands weren't willing to. They always know that brands weren't going to take on a large percent of this pressure. So I don't think it fell for them that they will no longer have business. They just knew that they have to bear the brunt of it. And then workers obviously face the worst end of that stick. And so Trump makes this announcement in August. And then what happens next? So after Trump made the announcement in August, some factories actually already started laying off workers in Tirupur and Tamil Nadu, which is the largest supplier in India to the US.

3:5040 % of exports from Tirupur go to America. So a lot of US dependent factories there. And in particular, what characterizes Tirupur to get such a major hit is that the factories are very small. They employ like 400, 500 workers. These workers are largely migrant workers who don't have a lot of collective mobility, or I guess they don't have the power to collectively bargain and kind of demand what they had the right to. And so when I was reporting, I heard reports that as early as July, that people were laying off workers and migrant workers were already going home. It was just not in mass. And then once August came around, I started reporting this in September.

4:28Essentially, they were saying that these mass layoffs are kind of imminent. Come two months later, there has definitely been mass layoffs in Tirupur. But then you also started seeing impacts on workers in areas in India where the manufacturing hubs are kind of more characterized by larger factories, so 2 ,000, 3 ,000 people under one roof working in these factories, they also started seeing the impact of these tariffs. And they started getting reduced hours. They're getting indefinite furloughs, being told that, you know, is Diwali holiday? You guys just go for a longer time. We'll let you know when to come back, when things in America get better.

4:59And that phrase really stuck with me. And that's definitely the rhetoric that was played around by suppliers to the workers. Because workers really don't have an idea of what a tariff is. That's also a lot of the messaging that I was getting, that for them, they don't really have an idea of exactly why their life is changing right now. And so it's very vague for them. They don't have a lot of clarity and they definitely don't have an idea of when things will go back to normal. It sounds like what you described in the story, which is that it feels for them like COVID again. What are the parallels?

5:28I remember reporting on COVID and like the furloughs and the uncertainty and no real answers other than you go home and you're not paid, you can't feed your kids. It really is like a pandemic for them. I think the similarity with COVID from like a macro perspective is that it's kind of unveiling how fragile a system the workers function in. And I think the reality is both of these hubs in Thirupur and in Bangalore, they were kind of still recovering from COVID era kind of wage disputes. And in Bangalore, they'd had a 10 year battle to increase minimum wages. And now the tariffs are being used as an excuse to kind of be like, oh, we can't do it right now.

6:04We're not going to get to it. And it was kind of just gaining momentum right before the 50 percent tariff came into place. And I think the similarity with COVID is also that these people feel like it's all happening all around them. It doesn't feel like they can go to anyone. And on top of that, the Indian government is not offering like, you know, unemployment benefits. These people are not getting severance because the factories don't have money because the brands aren't paying them. So it's that spillover effect that just feels very reminiscent to them, like COVID, because there's nowhere to go to.

6:34You just have to deal with it on your own. Let's put a pin in what you said about the brands not paying and come back to that. But I was hoping first you could tell us what does happen to these workers when they're let go. I mean, do they go home? Do they have any kind of savings or social safety net to fall back on? I mean, for a lot of the workers, what they're doing right now is falling into daily wage labor, which pays, I want to say, one third of what a factory job would pay. Their biggest complaints from the ones who spoke to me is the fact that it doesn't have the same level of security, right?

7:06You're being told you can come in today and the next day you can't. Whereas working in a factory, you have access to pension funds, you have provident fund access. And on top of that, I think the fact that they're doing work that's much more physically laborious affects their physical and mental health as well. A lot of them have gone into agricultural or construction work, which is very different from working in a factory. There's already a lot of talk around the impacts of climate change inside factory floors in places like India. So doing kind of more primary sector work like in agriculture or in construction is affecting their life, not just monetarily, but also physically.

7:45And in terms of living paycheck to paycheck, that was already the reality in these factories. So right now it's more like working as a daily wage labor would, right? You earn, let's say,$5 that day. They're probably earning less, like about$2. And that's all you have to feed your family. And you don't know if you're going to get the same amount the next day. And I think that's kind of what you hear largely from migrant workers who have to go back to their home states where things are not as stable, like employment is not as stable. Did you hear anything from the brands themselves? Like, are they being are they having transparent conversations with like their suppliers around geopolitical risk, around human impact?

8:23Right. So we've had conversations in the U.S. around, you know, the fashion workforce here or retail impacts of tariffs. But I don't know that people are connecting the dots, as your story so beautifully did, between these workers and what's happening in Washington. What do the brands say? So this is something that we actually had a lot of difficulty reporting out. And this is something that we say it's really extraordinarily difficult to get data and direct kind of causality from a particular brand. There have been brand names that have been thrown out that have large productions, especially in Theropore.

8:55but the situation as it stands is like no labor organization on the ground and no worker unless they're the ones sewing the label on has a very strong idea of which brands they're working for and that's largely also because of the nature of the industry right because these are subcontracting factories where majority of these people are employed and so they might actually have no idea which brand they're making clothes for they might be in the dyeing unit they might be in the tailoring unit but in terms of brands responses i think that's something that we're definitely keeping an eye on and we want to do a follow-up story on because we'll see how long these tariffs last.

9:25Because as it stands right now, it's still kind of mobile as to if these tariffs will stick or not. And I think brands are waiting for that to give out a full statement. In terms of suppliers, we spoke to a lot of suppliers like big and small. We even spoke to the largest supplier in India that sends exports to the US, Shahi Exports. And they essentially said that, you know, the reality is that brands will have their back and they don't realize that the way the system is set up, their purchasing practices is the reason workers are in this condition. So they can speak a lot about certain rights and having certain standards that suppliers need to impose and hold up.

10:03But it's really the purchasing practice and the way contracts work in the supply chain and in the exporting industry that leads workers in this like really helpless condition. I actually don't think brands can say that they're unaware of the consequences of their actions. I mean, as you noted, this exact same scenario more or less played out beat for beat during COVID. Brands said, well, there's no more demand for our products. So we're terminating our contracts effective immediately. Best of luck, workers. And that seems to be what's happening here from the sound of it, right? Yeah, I think I'd say so exactly.

10:34And I spoke a lot with the workers' rights consortium. And they work on the ground with labor organizations, but also directly with labor going to factories collecting data. And they said that, you know, know, when COVID happened, because they were working a lot around COVID, that they were the ones that pushed a lot of brands to retroactively pay back suppliers because they canceled orders because they can do it. They have all the agency. And so they have a spreadsheet that they shared with me that they used during COVID of the brands that went from a red to a green in terms of paying their suppliers again.

11:05So in this moment, that's not something that we're seeing, but it could potentially be a solution. But yeah, brands, I think, are fully aware, but I don't think they're vocally saying anything right now. Are any brands actually implementing the solutions that we're talking about here? So I think from the brand side, although there's a lot of talk and discussions about what can be done to stand next to workers and labor rights, in practice, there's not anything in place that would fix this kind of inequitable system that's currently functioning and putting workers in these conditions, which is these short-term contracts and brands not knowing where subcontracting factories are connecting with suppliers.

11:40So I think the reality is, although brands are fully aware, there's very, very few brands that are currently willing to offer or even offer these solutions out to help both suppliers and workers. The other part that Sarah Kent, who's our chief sustainability correspondent, talks about is this sort of fragmented, complex supply chain that also gives brands an out. It's like they're working with suppliers of suppliers. So they get to keep a sort of arm's length relationship and say, we don't really know the worker that's got sent home today with no way to feed their kids. That's definitely a factor in this, correct?

12:12Yeah, exactly. I think that has to do largely with the fact that they're not able to make the connections, even if informally it's very much known within India or any other kind of global south manufacturing hub that that's how it works. But India in particular, and Theropur in particular, is known for the amount of subcontracting factories it has. That's really like the lifeblood of this city. It is known as the dollar city within India because of the amount of U.S. exports it puts out. And subcontracting factories are essentially the main suppliers to these bigger factories because they just get such large volumes of demand from the U.S., which is also one of the reasons they're unable to kind of make a pivot and offset the impact that the U.S.

12:49tariffs have had. Can you dig into that a little more? India's garment sector was growing quite rapidly before these tariffs, and they weren't only exporting to the U.S. I mean, is it possible that with all this uncertainty with Trump, it'll continue the trend of factories looking for buyers elsewhere in the world? I mean, maybe they hire some of these workers back. So what I've heard, and that's a great question, because that's something I was asking them, are you guys able to offset this huge kind of loss from the US? And what they told me repeatedly is that they're looking, obviously, and maybe even depending on certain increases in demand from the UK and Europe, they have FTAs that have been signed, and they have kind of created momentum, but I was like, you know, are they strong enough?

13:30in Theropur in particular, which has been hit the hardest because it's so export demand driven. They said that it's not the same and it's not able to kind of offset that level of impact because the UK and Europe don't have the same amount of large volume orders. That being said, certain export association people have told me that they're also looking to Russia, which is quite ironic and interesting. And it's something that I wanted to even like ask further questions to them on in terms of how they were kind of hoping to move that needle. But because our story is focused on workers, it's something that I didn't like, you know, delve on too much into.

14:07But they said that Russia is an option that they kind of pushed away for a long time because of language barriers, actually. And now they're considering Russia as a market as well to kind of offset this U.S. demand gap. But they're also hearing from diplomats and from Delhi that this tariff is not going to stick. And so I think they're latching onto that much stronger than they're thinking of strategies. So there are things that some of these, in particular, the larger exporters are able to do to protect their relationships with U.S. brands. One of the things is to absorb the cost, right? At least half of the cost.

14:38So they're taking on maybe the first 25 percent, but not the second 25 percent. Is that sustainable, Shiza? Like at some point that's going to eat up margins. Yeah, and I think you're absolutely right. It's not sustainable for long. And I think that's also the perspective these exporters have. They're also aware that they're very large, the big exporters, and they're able to take on this cost right now, let's say for a three month's time. And Shai Exports, for example, it's taken on the 25 % Russian penalty for some brands while the brands take on the 25 % cut. And they've literally said that come December, they will have to rethink their contingency plan because it's not sustainable at all because margins are already wafer thin.

15:15They're currently operating at a loss. But Shai Exports and also labor organizations, when they speak about these situations, about how long can suppliers take on this cost and this burden, They say that while large exporters can take on the burden for, let's say, three months, for smaller ones, they're already shutting down, you know, they're closing business. And so while companies like Shahi can take on the burden, for small businesses, it's quite impossible to do the same.

15:41We'll be back with more of the debrief right after this.

15:48so if this continues past december with no resolution in sight what happens next i know there's been some developments even in the in the few days since your story ran yeah so i would say that the most recent developments are that there has been reports reuters did the most recent report that india said that it was willing to essentially scale back on some of its russian oil imports while double its annual imports of oil and natural gas from the U.S. if prices are competitive. And it also said that it was something that was considering very seriously, but these were through people who are familiar with the discussions between the Indian and U.S.

16:27diplomatic parties, right? And that's the most recent development. But I think that kind of optimism that exists is slowly kind of fading away for people on the ground, the people who are like living this everyday reality. And for them, it's just feeling like a longer wait and a bleaker future. And I think that goes for both suppliers and the workers, except for the workers, they're not maybe fully aware, at least a majority of them on negotiations going on in DC or Delhi. And so I would say that it really is now up to the Indian government while it's doing these negotiations to kind of put a helping hand out.

16:59There have been a lot of demands from exporters in particular to kind of reduce loan terms and offer like emergency credit lines and also kind of give tax breaks to provident funds that they have to pay taxes on normally so they can pay out workers. Because the reality is that there's no money available to these suppliers if these orders don't come in, if orders have been reduced. And so it's really up to the Indian government to kind of play its part like it did during COVID. But also when you speak to these large exporting companies, they will say that they had to kind of shoulder a lot of this burden.

17:34When COVID happened, not just now, they didn't lay off any of their workers yet during the situation. And during COVID, they had to pay out their workers off of their margin because the Indian government didn't offer any help. So people aren't particularly hopeful about the level of initiatives and help that might come from like a national level or a state level. And I'll note that we're recording while Trump is on his Asia trip and he's been announcing trade deals left and right, but India has not been one of them. And Modi has not been president at any of the meetings that he's been having. It seems like we're not seeing imminent relief here.

18:09Yeah, I totally agree. And I think that's something I thought about as well, like why Modi is not in these kind of talks now that the US president is in Asia. And I think that doesn't necessarily bode well for what might come in the next couple of months. People were hoping that there would be relief packages in mid-October, and then there would be an announcement that this tariff is going to reduce in end of November. But I feel like that seems unlikely and unlikelier as time goes on. And we're talking about job losses in the millions, right? And it sounds like there are no other signs we should be looking for that things are stabilizing, except everything you just said.

18:44Any signs that will show that things are getting worse the next few months that will be like a red flag? So one of the things that I was quite scared of when I was reporting this out is when people were saying that a lot of brands right now, they might have paused orders, but they have not completely pulled out from these factories. So they have some sort of hope that they can come, you know, inject their orders back in. And also going forth in December, brands will be set placing orders for December and fall next year, which is kind of the biggest time for orders. And whether or not they do that is what will set the precedent for whether or not these factories are going to sustain through next year.

19:19Because right now they don't have a lot of hope for six months because these contracts that brands and suppliers have are on a six month basis. But come December, if orders don't renew for next year and these tariffs haven't been reduced and there's not a lot of contingency plans that have been set in place for bigger exporters, I think everyone's going to have a very big shift in strategy and we're going to see even larger amount of layoffs happening. And so I think that's something that's extremely scary that could be imminent. So, Shaiza, what's one policy that would make the biggest difference to workers if it were to pass the next few months?

19:53So I think the policy, while it could come from the Indian government in terms of unemployment support or wage subsidies. I think what would make the biggest difference is if major brands committed to upholding their existing contracts instead of pulling out, even if it was at reduced volumes. And I think that would prevent like the panic of layoffs that a lot of smaller suppliers are feeling right now and then affecting workers. And then India, in terms of policy level, I think India needs a safety net that ensures that workers aren't left completely stranded between these different crises, like first COVID and then now not getting enough minimum wage and now this.

20:24And I think those two combined would offer a bit more kind of tangible support to workers and communicating that support, I think, would also be really, really crucial, which is something that doesn't pass through. Like there's a lot of asymmetry of knowledge in terms of what's available in terms of help to workers. So I think having the Indian government communicate that we're going to make certain things available would be really, really crucial in the next two months. And from a broader perspective, I think if brands were committing to their contracts and considering how they could also minimize the impact on people making their clothes.

20:56That would make a big difference. A thousand percent. I kept thinking at the beginning of this episode that so much of this is probably less about the fallout of trade, like trade politics and more about the vulnerability of the fashion system globally. So I think our listeners would be interested to hear how you reported this story. I mean, this is a pretty opaque industry. These are not the most connected places on earth. How did you find out what was really going on? So I think you're completely right, Brian. I think that reaching these particular cities, which are not necessarily the most connected cities, even within India, where the industrial kind of hubs are, it's very difficult to get in touch with people on the ground who are working there every day or go there often.

21:38So I think the first set of people I approached were international labor organizations who work with local labor groups. I also reached out to kind of South Asian focused labor organizations like the Asia Wage Floor Alliance, Workers' Rights Consortium is one of them as well. But I also basically went and searched all of the different labor unions that exist in Karnataka, which is where Bangalore is, and in Tamil Nadu, where Tirupur is. And I essentially tracked down the leaders of all these different labor organizations, about 20, so 10 in each. And obviously not all of them got back, But the ones who did, you also find that there's contention amongst unions and you have to navigate that as well to see who's really telling the truth or who's really telling you the most updated information.

22:19For a long time, it was a lot of wait and see. Like when I first started reporting this story, it was a lot of we haven't heard the scale of impact just yet. We've heard some stories. We know friends who are leaving. And then in three weeks time, that completely flipped. And I was hearing from these labor organizations themselves that it's happening in mass. People are not getting transport from their hostels to the factories, which is what's happening to migrant workers who live in these large hostels near the factories. And so the suppliers or factories were doing everything they could to kind of not pay workers at a certain stage.

22:51And that's when things started to get messy. And I started speaking to actual workers and I was able to connect to them to the labor organizations. And I would say that Asia Wage Flow Reliance was also very, very helpful because they were also reporting kind of in parallel on the impact that the tariffs were having, not just in these hubs, but across India. So they were looking much more broadly, but they're really helpful in kind of understanding what the nature of the industry is in each of these hubs. I have a journalistically geeky question. How relieved, and that's the word I'm imagining them to feel, were workers to speak to someone and feel like they had a vehicle to tell their story to a journalist?

23:28Did you have that reaction from people at all? I think I had it from the labor union leaders, but not so much from the workers, which I think I expected because having reported on South Asia before, I think for workers, I mean, people love to share their story, but I don't think they're really thinking about, oh, this is going to change my life and someone's going to offer a hand of help because that doesn't come very often. But for the labor union leaders, they understand the value of getting these stories out to get at attention. I think they were really glad that someone was getting on it and really focusing on the worker story and not just kind of the supplier side of the story.

24:00Because suppliers are obviously impacted and hence workers are impacted. But the worker tends not to get centered oftentimes because in a world that, you know, where in terms of the money flow, supplier and brand are the two kind of, I suppose, entities that get the most attention. It was such an excellent story and so well reported. And I think you're right in that the human impact of this gets lost. But I like personally, I think it's amazing when these stories get written. Shiza, this is such an impressive piece of journalism that you've done. And it should be noted you're also brand new to BOF.

24:30So I hope this is the first of many, many stories for us. Yeah, I hope it was really funny because on Wednesday when I had my catch up with Mark and Sarah, we're like, this is done. Like, congratulations. I was like, yes, now on to the next. I was like, what's going to be the next one? That's how this goes. That's how it works. Absolutely. Please be sure to check out Shaza's article, India's Garment Workers Are Paying the Price for Trump's Tariffs, at businessoffashion.com. This and other stories are available to BOF Professional subscribers only, and you can find the links in the episode notes.

25:03You've been listening to The Debrief, produced and edited by Olivia Davies and Arith Bria. I'm Brian Baskin. And I'm Sheena Butler-Young. We'll be back next week with a new episode. Thanks so much for joining us and be sure to follow us wherever you get your podcasts.