The United States plays a pivotal role in the global textile and apparel market, both as a major importer and exporter. In 2024, the U.S. imported textiles and apparel valued at approximately $107 billion, marking a 2.6% increase from the previous year. However, during the first half of 2024, imports experienced a 3.58% decline, totaling $49.3 billion, influenced by inflationary pressures and supply chain challenges. The U.S. market is one of the most critical destinations for Indian textile exports, including cotton yarn, home textiles, garments, and technical textiles. However, with the U.S. considering or imposing tariffs on Indian textile products, several short- and long-term impacts can be expected.
The U.S. is among the top three export destinations for Indian textiles and apparel, contributing nearly 15–18% of India’s total textile exports.
Key exports include:
1. Cotton-based products: Bed Linen, Towels, Garments.
2. Man-made fibers and synthetic blends.
3. Technical textiles such as Geotextiles, Industrial fabrics, and protective wear.
Prior to the Trump administration’s aggressive trade realignment, most Indian textile and apparel products exported to the U.S. were subjected to generalized system of preferences (GSP) rates or low-to-moderate MFN (Most Favored Nation) tariff rates, typically ranging from 5% to 12% depending on the product category. However, post-2018, under President Trump’s “America First” policy, India was removed from the GSP program, eliminating duty-free benefits on nearly 2,000 products, including key textile and apparel categories (HSN Classification – Chapter 50 to 63)
This move effectively raised tariff exposure for Indian exports, and by 2025, with the latest reciprocal tariff measures, Indian textiles are now facing a steep 26-27% ad valorem tariff, marking a twofold to fivefold increase in duties compared to the pre-Trump era. Despite the increased tariff hike posing challenges and increasing costs for the Indian textile industry, India retains a competitive edge, as rival exporters such as China, Vietnam, and Bangladesh.
Potential Impact of U.S. Tariffs on Indian Textiles:
1. Reduced Export Volumes – The increased tariffs are expected to make Indian textiles less price-competitive in the U.S. market, potentially leading to a decrease in export volumes.
2. Pricing and Profit Margins – To remain competitive in the market, Indian exporters might need to absorb a portion of the tariff costs, potentially squeezing profit margins, alternatively passing the full cost to consumers which could lead to reduced demand.
3.Competitive Disadvantage – The additional 26% tariff elevates the cost of Indian textiles and apparel in the U.S. market, potentially making them less competitive compared to products from countries with lower or no tariffs.
4.Shift in U.S. Sourcing by Vendors – U.S. importers may seek alternative suppliers from countries not subject to these tariffs, such as Vietnam and Bangladesh, which have benefited from favorable trade agreements.
5. Impact on SMEs and Job Loss – Small to medium-sized textile units in India, especially those in Tamil Nadu, Gujarat, and Punjab, might face financial stress, leading to job losses and plant shutdowns.
Strategic Responses and Considerations:
1. Diversification of Export Markets – To mitigate reliance on the U.S. market, Indian exporters may need to explore and strengthen trade relationships with other countries. Exploring alternative markets where the demand can be substantial, as in the case of the U.S., can be a huge win-maker for industry players.
2. Enhancement of Product Value – Investing in quality improvements and innovation can help Indian products stand out, even in markets with higher tariffs, along with an approach to offset increased costs. The supplier of textile products with reduced cost/margin and good quality could be a great advantage overall.
3. Policy Engagement – The Indian textile industry should advocate for the mutual elimination of tariffs to level the playing field with competitors like Bangladesh and Vietnam, who benefit from lower or zero-duty access to the U.S. market. Collaborating with trade bodies and government agencies to represent favorable trade terms.
4. Strengthen domestic demand – Instead of pushing for exports to countries like the U.S., which is highly uncertain at the moment, the domestic push for textile products could be a great booster for the local players and can be a game-changer.
While the 27% tariff does hurt short-term competitiveness, India is relatively better positioned than its key Asian peers. If Indian exporters innovate in supply chains, negotiate on costs, and explore new markets, they can turn this into a competitive advantage.
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For more information or questions, you can contact us at roopa@hnaindia.com or yash@hnaindia.com.
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