Indian businesses are looking to expand production in Africa for exporting to the U.S., after President Donald Trump hit the South Asian nation with one of the steepest levies globally as punishment for purchases of Russian oil.

Kigali

Donald Trump has signed an order to impose tariffs imports into the U.S. from countries including China, Mexico and Canada.

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Indian companies are seeking to offset the effects of newly imposed 50 percent US tariffs on certain Indian goods by expanding their production in Africa. The tariffs have made it difficult for Indian exporters to maintain profit margins and competitive pricing in the US market, prompting them to look for alternative manufacturing locations with lower trade barriers.

African countries such as Kenya, Ethiopia, Botswana, Nigeria, and Morocco are attracting Indian businesses due to their favorable policies, tax incentives, and affordable labor. However, Indian firms face challenges, including the need to renegotiate business terms and navigate risks such as political instability in some regions. Trade between India and Africa has grown significantly, surpassing $100 billion, as India increases its economic engagement on the continent.

Why Indian exporters are expanding production in Africa

Indian companies are scrambling to offset the pain from steep new U.S. tariffs. Exporters are racing to Africa in search of a tariff haven after Washington slapped a 50 percent duty on some Indian goods earlier this week. Now for more Bloomberg's and your gang that joins us now from Kigali Rwanda. And you were yesterday we were talking about China seeing the opportunity and sizing up the opportunity in the African continent. Now India as well looking for new markets. Absolutely. And you just mentioned in the intro 50 percent tariff is very steep. It's too much of an excruciating loss to absorb on the Indian businesses side. But also it's too high of a margin to impose on prices. It will have the end consumers and demand is going to tank. As a result Indian companies are looking for alternative markets where they can produce their goods in an affordable way and they can make it to the U.S. markets with tariffs not necessarily adding a huge chunk to the price or eating up their margins. So that's why we are seeing them looking to Africa. And most importantly U.S. is one of their important export markets in 2023 exports of textile jewelry and diamond 20 billion dollars. And with this tariff 90 percent of demand in certain goods and exports is likely to decrease. And that's why Africa is now emerging as that sweet spot tariffs of at least 10 percent. And that's why they think they can do business here. You have companies that work in April that are looking to expand operations in Kenya and Ethiopia and those that deal with gem diamonds are looking to expand operations in Botswana and Africa is taking advantage of this opportunity. There are certain African countries Nigeria Morocco Ethiopia that have a conducive environment in terms of policy tax incentives and also just having affordable labor. But one thing Indian companies will have to contend with is they'll have to renegotiate terms of doing business if they choose to relocate big businesses and also perception. Countries like Ethiopia there's risk of conflict and that's something that they'll have to work with them and consumers. Yeah. So obviously it varies country by country. But as we speak there was an India Africa trade conference taking place place this week. What were some of the takeaways. Do you want to one of the highlights is that trade between India and Africa cost the 100 billion mark. And this is really significant because it has almost doubled in comparison to the covered period. And if you look at the last five years it has increased by about 78 percent which is really really monumental. You also have India increasing lending to the African continent 12 billion dollars in terms of concessional loans 700 million dollars in terms of grants. And they're almost trying to get into that big boy circle trying to flex their muscle against the US UK EU and China. But then again they have a long way to go to be able to come into Africa and fully establish yourself. You need to announce yourself. China has done that through the Belt and Road Initiative. U.S. is doing that through minerals and security deal. So India will have to push the envelope a little bit further to solidify their place on the continent.

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Why Indian exporters are expanding production in Africa

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