U.S. tariffs cause turmoil in Indian textile sector

The Indian textile industry is in a state of alarm as U.S. President Donald Trump's administration has imposed an additional 25 percent tariff on Indian goods, bringing the total levy on certain products to over 50 percent. The move, announced on Wednesday, is a direct response to India's continued imports of Russian oil. While an initial 25 percent tariff has already taken effect, the new rate will be implemented on August 27.

The impact is being felt immediately across the industry. American retailers have begun discussions with Indian exporters to determine their next steps, according to multiple exporters who spoke with NDTV Profit. In some cases, buyers have already instructed their suppliers to stop shipments and hold off on new orders.

Indian garment and textile exports hit by US tariffs

The impact is particularly severe in major textile and garment hubs like Tirupur, Coimbatore, and Karur, which collectively employ over 1.25 million workers and export an estimated Rs 45,000 crore worth of garments annually.

According to a report by The Indian Express, exporters in Tirupur, India's "knitwear capital," are already reporting that orders are being paused, redirected, or completely lost to competitors in countries like Bangladesh, Pakistan, Vietnam, and Cambodia. These nations currently enjoy significantly lower U.S. tariffs, ranging between 19 percent and 36 percent. One exporter told the publication that a regular U.S. shipment had been diverted to Pakistan, while another was told to "hold on" to a summer order.

The new duties, which can push effective rates for some knitted garments as high as 64 percent, have been described by some exporters as a "de facto trade embargo." This steep hike makes Indian products up to 35 percent more expensive than those from regional rivals. K. M. Subramanian, president of the Tiruppur Exporters’ Association (TEA), highlighted the financial strain, stating, "Our margins are just 5 percent to 7 percent; how can we share this cost?"

The timing of the tariffs is particularly devastating, as the Tamil Nadu textile belt was just beginning to see a rebound in U.S. orders. Exporters had invested in new machinery, spurred by the signing of the India–UK Free Trade Agreement and a growing interest from the U.S. due to elevated tariffs on China. Now, that optimism has turned to despair. Analysts fear a 40-50 percent drop in U.S.-bound orders, especially in the cotton and knitted apparel segments.

Indian home textile exports feel the heat

The fallout is not confined to readymade garments. In Coimbatore and Karur, known for home textiles, orders are also stagnating. K. Selvaraju, secretary general of the Southern India Mills’ Association, said that buyers are deferring or holding off on summer bookings for products like bed linens and towels. Selvaraju also pointed out that the tariffs compound existing challenges for the industry, such as an 11 percent import duty on cotton and an inverted GST duty structure that adds an additional 6-7 percent to export costs, further hurting competitiveness.

Industry leaders warn that without a resolution, the crisis could lead to job losses for 100,000–200,000 workers in the region over the coming months. While some larger branded buyers may stay due to India's social compliance and operating protocols, Subramanian cautioned that the industry "will still bleed for some time."

Indian exporters fear losing competitive edge

The new tariffs threaten to severely undermine India's competitive edge. For instance, knitted apparel could face a duty of 64 percent, and woven apparel could be hit with a 60.3 percent tariff. This is a significant disadvantage compared to competitors like Vietnam and Bangladesh, where tariffs stand at 20 percent each. This disparity has led to fears among analysts that U.S. orders could shift to these lower-tariff countries.

This has put pressure on major Indian textile companies, who are now exploring alternatives. Gokaldas Exports, which counts GAP, Walmart, and JCPenney among its clients, stated in an interview with NDTV Profit that brands are discussing options, including utilising the company's production capacity in regions with lower tariffs. The company's management noted that pricing power has been "subdued," putting pressure on profit margins.

The stakes are high. The U.S. is the largest destination for Indian textiles and apparel, accounting for 28 percent of total exports in FY25, a market valued at 36.61 billion dollars. Between January and May, the U.S. imported 4.59 billion dollars in textiles and apparel from India, a 13 percent increase from the previous year. India currently holds a 5.8 percent share of the U.S. garment market, behind China, Vietnam, and Bangladesh.