Bhadohi, India: Surya Mani Tiwari has had sleepless nights ever since United States President Donald Trump slapped India with 50 percent tariffs.

The 78-year-old exports carpets worth more than 1 billion rupees ($11.4m) from Bhadohi in the northern Indian state of Uttar Pradesh to the US every year. But the tariffs, the highest tier so far, have brought business to a screeching halt.

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“We are completely dependent on the US for our business and have no other markets. The tariffs have brought our production to a halt, and no consignment has been dispatched to the US for the past one month,” Tiwari told Al Jazeera. “It is the worst phase of my 50-year career in the carpet business, and the industry will die a painful death if the situation doesn’t improve in the next two months.”

Tiwari is among the several hundred carpet exporters in Bhadohi, popularly known as the carpet city of India, who are staring at a complete collapse of their business ever since Trump announced tariffs on India – initially 25 percent which kicked in on August 7, and an additional 25 percent from August 27 on account of India’s imports of Russian oil which he has said was is fuelling the war in Ukraine.

India’s predominantly export-based carpet industry produces handloom, handicraft, knotted, Persian and various other types of carpets that have a high demand in the US, including for wall-to-wall carpeting in homes and businesses.

The industry with a turnover of 160 billion rupees ($1.83bn) employs more than 2.5 million people across the country, the majority of whom are weavers, as per the Carpet Export Promotion Council (CEPC).

Bhadohi is the epicentre of the carpet business and controls more than an 80 percent share of the total turnover. It houses about 1,200 exporters who also double up as manufacturers. Approximately 1.4 million people, 5-6 percent of whom are women, depend on this business for their livelihood.

“We have been ruined with such high tariffs as the carpet industry runs completely on exports with a very negligible domestic presence,” CEPC director Piyush Baranwal told Al Jazeera. “The US is the major market for our business and contributes to around 60 percent share of the total turnover. Several millions of people earn their livelihood through carpets, which is like a cottage industry here.”

Production was already on the decline since Trump announced reciprocal tariffs on April 2, but manufacturers and exporters were still hopeful that the bilateral discussions between New Delhi and Washington, DC would bring a competitive tax rate.

“We were hopeful that the discussions will help to sort out the issue, but nothing fruitful came out, which was very disappointing. The harsh tariffs have virtually put the industry on a ventilator as it is not possible to pay such high taxes when the margin is not more than eight to 10 percent for wholesalers,” Baranwal said.

Slipping market share

Sanjay Gupta, a carpet exporter and partner in Global Overseas, pointed out that the industry, despite its modest turnover, generates employment on a large scale. It works like a cottage industry where the exporters outsource orders to weavers who work from their homes.

“The weavers are a major force here,” he said. “The sudden tariffs will have major repercussions, as it might trigger large-scale migration of unemployed people to other states and would be difficult to bring them back in the future. I have lost around 40 percent of my business,” since the reciprocal tariffs were announced in April, he said, and in turn he has cut back on commissions to weavers.

Exporters also fear that India’s competitors in the carpet business, such as Turkiye and Pakistan, which have lower tariff rates at 15 percent and 19 percent, respectively, will snatch their market in the US.

“It would become increasingly difficult to hold our market share in the US, as other countries with lower tariffs will definitely try to increase their dominance. We might lose a major chunk of our US market if no timely resolution is done,” Md Zakir Hussain, 31, a carpet exporter and manufacturer, told Al Jazeera.

The loss of business has also spread to middlemen like Md Zamir Ahmed, 40, who supplies cotton yarn to the manufacturers. “We were suffering for the past five years since the yarn suppliers began to directly deal with the manufacturers and devoured our profits. The small market that we still possessed has come to an end with these tariffs.”

Job losses

Ever since the announcement of tariffs, layoffs have begun in the carpet industry because of the drop in orders. The weavers who are paid daily on the basis of their work are almost jobless and have started migrating to other states.

Raza Khan, president of All India Carpet Manufacturers Association (AICMA), told Al Jazeera that about 100,000 people have become jobless and the number could reach 700,000, or half of Bhadohi’s weaver population, in the next two months if the situation does not change.

Fatima Samir, 30, a mother of three daughters, who works on binding carpets – the process of finishing the raw edges of a carpet – gets paid 60 rupees ($0.68) for an hour of work. Even that paltry sum has been cut down now, forcing her to keep her youngest daughter out of school because of the financial crunch. Her husband, a carpet weaver, migrated to another city in April, where he found work in a soft drink bottling factory, when the orders in Bhadohi started to slow.

Even though he is sending money home, the extra expense of running two homes has hit the family, leaving Samir worried about her daughters’ future.

“I am trying to give a good education to my daughters and do not want them to get involved in this menial work. But the dwindling work worries me. Who knows what will happen in the future?” she said.

Imtiaz Ansari, 50, a carpet manufacturer and exporter, told Al Jazeera that he has already scaled down the working days of his employees.

“We have curtailed down the working hours of our employees to just three days in a week due to the present crisis. We might have to start retrenching them if the situation remains the same. Over 4,000 weavers that depended on us have stopped getting the work for the past one month. Over 90 percent orders are now on hold and just the pending orders are being completed now.”

Obaidulla Asri, 45, a local journalist who has been writing about the Bhadohi carpet industry for several years, warned that things could worsen.

The manufacturers borrow money from the banks to make the carpets for which they have received orders, but get paid only two to three months after delivery.

“The manufacturers here work on bank loans and have longstanding credits with their US buyers. The starvation of orders will have a deadly impact not only on the industry and its workforce, but also on the entire economy of the city, as the local businesses here depend on the foreign revenue that comes from the carpet sales. The [drop in those sales] has already reduced the buying capacity of the local people,” and you can see that in the empty shops and markets, he said.