How TN can trump tariffs

Is the glass half full or half empty? The Trump administration’s tariff regime has created upheavals in world trade. Tamil Nadu, however, sees an opportunity both for its MSME sector as well as the big-ticket MNC investors. For the MSME sector — backbone of the state’s export performance in competing with Thailand, Vietnam and Cambodia — it’s a chance to find newer markets and products. For the MNC manufacturing investors, it’s a chance to boost local sourcing thus growing the MSME vendor base.“The ongoing tariff shifts and global realignments in trade may have opened a window of opportunity for Tamil Nadu’s MSMEs in certain sectors,” says industries minister T R B Rajaa. “While Vietnam and Thailand are often cited as alternatives, Tamil Nadu has a distinct edge. We have a highly skilled talent pool and a mature manufacturing ecosystem across multiple sectors,” he adds.There’s reason for this optimism. According to the latest NIRYAT data, Tamil Nadu’s overall exports hit $52 billion by FY24-25, up 19.5% from $43.5 billion in FY23-24. Of this, $18 billion is engineering goods including automotive components, $14.6 billion is electronics and $5.4 billion is ready-made garments. MSMEs are the backbone of exports in India – the number of exporting units increased from 52,849 in FY20-21 to 1,73,350 in FY24-25. And TN is the third biggest exporting state after Gujarat and Maharashtra.TN-based major manufacturers have been expanding to non-North American markets. Ashok Leyland, which saw a 52% jump in export volumes in Q4, has said it is targeting GCC (Gulf cooperation council) and African markets in a big way. TVS Motor, which saw a 22% jump in FY25 exports, is shipping to markets in South and Southeast Asia, Latin America and Africa.TN’s export strategy ties in with its push to attract new investments. “We are pitching to companies around the world at a hectic pace to bring in large-scale investments and global supply chains,” says Rajaa. “MSMEs are at the core of this growth story, and we encourage them to leverage emerging opportunities,” he adds.“Tamil Nadu has a wide range of MSMEs and our focus is to make the quality of products export worthy,” says Atul Anand MSME secretary. “The state’s large number of clusters helps with making these companies export worthy.”The good news is that TN’s MNC investors are also looking at the tariff scenario as a window to increase local footprint. “While our shipments and exports to the US are continuing without disruption, we are looking at potential uncertainty in other regions where we operate, including Southeast Asia, home to our largest factories, and Taiwan,” says Niranjan Nayak, MD, Delta Electronics India. Thailand is Delta’s largest base of operations in addition to Taiwan and China. “Future attractiveness might be lower [in these regions] or there could be a degree of uncertainty and this gives us an opportunity to increase our manufacturing capability here in India because, based on the current tariffs, India is not in a significantly negative position,” he says.The state’s MSMEs can look forward to domestic opportunities too. For, tariffs will affect the supply chains of all businesses, and big manufacturing will boost local sourcing to survive. That means new business for MSME vendors. “The tariffs will have a direct or indirect impact on everyone. Aligned with the ‘Make in India’ initiative, we are advancing our localization efforts right down to the smallest components so we don’t get impacted by global scenarios,” says Syed Sajjadh Ali, MD, electrical sector, India, Eaton. Lower dependence on the global supply chain means “an upper hand in terms of cost reduction” and “the vendor base is happy to get into new business as volumes ramp up”.“We are seeing growing interest from international investors who are looking to diversify their sourcing beyond China,” says Rajaa. Now, that has expanded to cover Southeast Asia. For Tamil Nadu, it can only spell opportunity.