Summary
Brace Yourself: 25% of India’s Textile Exports Face Tariff Hits Next Month — Here’s What You Need to Know
India’s textile and apparel industry, a vital pillar of the country’s export economy accounting for approximately 8.2% of merchandise exports in fiscal year 2023–24, is poised to face significant disruption following the imposition of steep tariffs by the United States. As one of the largest export markets for Indian textiles, the US has enacted tariff hikes reaching up to 50% on a broad range of products including apparel, knitted garments, and home textiles. These measures are expected to directly impact close to one-fourth of India’s textile exports, threatening a 20–25% decline in shipments over the coming months and jeopardizing the livelihoods of millions engaged in the sector.
The tariff escalation stems from a complex mix of economic protectionism, geopolitical considerations, and trade imbalances. While the US justifies the tariffs under national security and unfair trade practice provisions, critics argue that the punitive duties—especially high compared to competing exporters such as Vietnam and Bangladesh—risk diverting orders away from India. The effective tariff on Indian knitted garments can reach as high as 63.9%, making these products among the most expensive in the American market and severely undermining India’s competitiveness.
In response, Indian industry bodies and the government have mobilized efforts to mitigate the fallout. Strategies include market diversification through Export Promotion Councils, export-linked incentives, and ongoing negotiations for bilateral trade agreements. Although small and medium enterprises, which dominate the textile landscape, face immediate risks of margin compression and job losses, there is cautious optimism about the sector’s resilience and ability to adapt by tapping into alternative markets and improving supply chain efficiencies.
The tariff imposition marks a pivotal moment in India-US trade relations, intertwining economic rivalry with diplomatic tensions. It highlights the vulnerabilities of India’s export-dependent industries to unilateral trade measures and underscores the urgency of diversifying export destinations and strengthening international trade frameworks. The coming months will be critical as India seeks to balance short-term challenges with long-term growth and competitiveness in the global textile market.
Background
India’s textile and apparel industry is a significant contributor to the country’s export economy, accounting for approximately 8.2% of the nation’s total merchandise exports in the fiscal year 2023–24. Globally, India holds a 3.9% share in the total trade of textiles and apparel, ranking as the sixth-largest exporter with an established footprint across 220 countries. The sector supports numerous specialized production clusters, including Surat, Panipat, Tiruppur, and Bhadohi, which are linked to diverse international markets through Export Promotion Councils (EPCs) focused on market mapping and product demand identification.
The United States has historically been one of the largest export markets for Indian textiles and apparel. However, recent policy changes have posed significant challenges. In particular, the imposition of a 50% tariff by the U.S. on Indian textile imports threatens to impact close to one-fourth of India’s textile exports, predominantly affecting apparel and made-up goods. Industry experts estimate a potential 20-25% decline in exports over the next six months as exporters face order cancellations and seek alternative markets and strategies to mitigate the impact. This tariff imposition has created a pronounced sense of uncertainty within manufacturing units, especially in key export hubs such as Tiruppur.
While this development poses a major challenge to the textile sector, the government has taken measures to provide some relief, including extending duty-free cotton imports until December 31, which helps improve cost competitiveness for exporters. Despite these efforts, the tariff barriers have added pressure on an industry integral not only to India’s export portfolio but also to the livelihoods of millions involved in the textile supply chain.
Tariff Measures Affecting Indian Textile Exports
The United States has imposed steep tariffs on Indian textile exports, set to significantly impact the industry. Starting with a 25% tariff and subsequently increased to a cumulative 50% duty, these measures target a wide range of labour-intensive and low-margin goods including apparel, textiles, gems and jewellery, shrimp, carpets, and furniture. The tariff hike is partly a penalty linked to India’s purchase of Russian oil and defence imports from Moscow, adding a geopolitical dimension to the trade measures.
The tariff increase poses a serious challenge to the competitiveness of Indian textile exports in the US market. While India’s textile and apparel sector is valued at $179 billion for 2024–25, with exports worth $37 billion, the new duties threaten to make many products unviable in the American market, risking the loss of low-skilled jobs. Industry experts estimate that nearly one-fourth of India’s textile exports will be affected over the next six months, with potential revenue losses between $2.5 billion and $3 billion due to a decline in export volumes by 40–50%.
The tariff structure is uneven compared to other Asian competitors: Japan and the European Union face 15% tariffs, South Korea 15%, Indonesia 19%, and Vietnam 20%, which places India at a disadvantage and risks diverting orders to these countries. Indian knitted garments are the hardest hit category, facing an effective tariff rate as high as 63.9% when baseline, country-specific, and penalty surcharges are combined. This makes Indian knitted garments the most expensive textile exports in the US market, directly targeting the core of India’s textile earnings.
The Confederation of Indian Textile Industry has expressed concerns that the removal of tariff advantages relative to competitors—except Bangladesh—will severely test the resilience of Indian exporters in the US market. In response, Indian stakeholders are exploring alternative markets and strategies to mitigate the impact, while continuing to engage with government bodies such as the Ministry of Textiles and the Ministry of Commerce & Industry.
The tariffs have also sparked warnings from trade experts that the ongoing tariff war represents a shift from a previously “win-win” situation to a “remarkable lose-lose” scenario for both India and the US economies. Despite some opportunities arising from tariffs on other nations, the overall effect presents significant challenges to the Indian textile sector’s growth and export sustainability.
Categories of Indian Textile Products Impacted
The Indian textile sector faces significant challenges due to the imposition of high tariffs by the United States, targeting key categories that form the backbone of India’s textile exports. Among these, knitted garments bear the steepest effective tariff rate at 63.9%, which includes baseline, country-specific, and penalty surcharges, making them the most expensive Indian textile category in the US market. This tariff hike substantially increases the cost competitiveness of Indian products, with examples such as an Indian-made shirt rising from $10 to $16.40, surpassing prices from competitors like China, Bangladesh, and Vietnam.
Ready-made garments (RMG) represent a crucial segment, with India accounting for around 33% of America’s total RMG imports in 2024. From April to October 2024 alone, India exported nearly $8.7 billion worth of RMG and $7 billion in cotton textiles, underscoring the sector’s importance. Regions such as Tirupur, a major hub responsible for over 30% of India’s RMG exports, are expected to be severely affected by the tariffs, facing intensified competition from countries with lower tariff rates like Bangladesh and Vietnam, where tariffs are around 31%.
Other major categories impacted include woven garments, home textiles (made-ups), and carpets, all of which contribute significantly to India’s textile export revenue. The sudden tariff increases also extend beyond textiles to related sectors such as leather and footwear, which form part of the broader textile and apparel ecosystem.
The tariff imposition is not only a matter of increased costs but also threatens the volume of exports. Sectors highly dependent on the US market—such as diamond polishing, shrimp exports, and home textiles—are likely to experience a sharp decline in sales due to their heavy reliance on American consumers. The textiles and apparel industry, valued at $179 billion in 2024-25 with exports worth $37 billion, is thus positioned at the center of this trade disruption, potentially leading to significant economic repercussions.
Causes and Rationale Behind Tariff Increases
The recent steep tariff hikes imposed by the United States on Indian exports, particularly textiles and apparel, stem from a complex interplay of trade imbalances, strategic economic interests, and geopolitical considerations. One key cause is the significant tariff gap between India and other competing countries such as Bangladesh, Vietnam, and Turkey, which enjoy lower-duty rates when exporting to the US market. This disparity provides these countries a competitive edge, increasing the risk of US buyers switching suppliers unless India either absorbs part of the tariff costs or diversifies into alternative markets to reduce dependence on the US.
The US administration’s tariff actions are part of broader trade measures targeting sectors where India has substantial export presence, including textiles, gems and jewelry, shrimp, leather, chemicals, and electrical machinery. The tariff increases aim to address perceived unfair trade practices and protect domestic industries from foreign competition by raising the cost of imports. Specifically, the tariffs serve as a tool to pressure India into negotiating more favorable trade terms or adhering to standards set by the US and other global trade bodies.
Moreover, while some exemptions apply—such as to pharmaceuticals, semiconductors, and critical energy resources—key sectors like textiles face significant exposure, with an estimated 55% of India’s US-bound exports at risk. The decision to exclude certain sectors highlights the targeted nature of the tariffs to safeguard critical supply chains while exerting pressure on others deemed less strategic or more vulnerable to import competition.
Economic rivalry also plays a crucial role in shaping the tariff policy. India competes internationally with various countries across different sectors: with Europe in pharmaceuticals; Vietnam, Mexico, Cambodia, Sri Lanka, and Bangladesh in textiles; and Israel in gems and jewelry. The US tariffs can be seen as a strategic move to recalibrate these competitive dynamics by reducing India’s export competitiveness relative to these nations.
In sum, the rationale behind the tariff increases reflects a mixture of economic protectionism, efforts to correct trade imbalances, and geopolitical strategy. This approach has elicited significant concern from Indian industry stakeholders who warn that the tariffs will erode competitiveness, lead to job losses, and dampen export growth unless countered by diplomatic engagement, export incentives, and market diversification strategies.
Impact on Indian Textile Sector
The imposition of a 50% tariff by the United States on Indian textile exports, effective from August 27, poses significant challenges for the Indian textile industry, a key pillar of the nation’s export economy. The sector contributes about 8.2% to India’s total merchandise exports and holds a 3.9% share in global textiles and apparel trade, with the US being one of its largest markets. The tariffs are expected to impact a wide range of textile products including knitted and woven garments, home textiles, and carpets.
Industry estimates indicate that the new tariffs could lead to a 40–50% decline in export volumes, causing a direct revenue loss estimated between $2.5 billion and $3 billion (₹21,250 crore to ₹25,500 crore). The tariff hike threatens the competitiveness of India’s textiles against other Asian exporters such as Vietnam, Bangladesh, Cambodia, and Sri Lanka, where tariffs remain lower. This erosion of competitiveness is likely to result in a market share loss for Indian exporters in the US market, which accounts for nearly 20% of India’s merchandise exports.
The impact on small and medium enterprises (MSMEs), which dominate the textile sector with over 70% market share, is expected to be particularly severe. MSMEs face diminished margins, reduced export competitiveness, and heightened risks of job losses due to the increased cost burden that may not be easily absorbed or passed on to buyers. The disruption in supply chains and increased tariff barriers have led industry bodies like the Federation of Indian Export Organisations to express concerns about long-term viability and competitiveness in the US market.
Despite these challenges, there is some optimism within the industry regarding its resilience and ability to adapt. Government officials and trade experts suggest that while certain manufacturing units may experience setbacks, the sector as a whole is not expected to face large-scale shutdowns. To mitigate the impact, Indian exporters are encouraged to diversify into emerging and traditional markets beyond the US, with dedicated outreach programs planned by the government targeting around 40 countries to reduce dependence on the US market.
Government and Industry Responses
The imposition of a 50% tariff by the United States on Indian textile exports has prompted significant concern from both industry bodies and the government, leading to a range of responses aimed at mitigating the impact on the sector. Industry associations such as the Federation of Indian Export Organisations (FIEO) and various sectoral groups have highlighted the challenges posed by supply chain disruptions and decreased competitiveness, urging swift government intervention to support exporters and preserve jobs.
Recognising the severity of the situation, the Indian government has initiated dedicated outreach programmes targeting 40 countries, including traditional and emerging markets like the UK, Japan, South Korea, Germany, and Canada, among others. These efforts aim to diversify export destinations to reduce reliance on the US market, which accounts for a substantial portion of India’s textile exports valued at over USD 48 billion. Export Promotion Councils (EPCs) play a central role in this strategy by conducting market mapping, identifying high-demand products, and linking specialized production clusters such as Surat, Panipat, Tirupur, and Bhadohi to new market opportunities.
Industry leaders have called for additional government measures, including ensuring access to raw materials at competitive prices, fast-tracking bilateral trade agreements with the US, and providing export-linked incentives and cheaper credit, especially for micro, small, and medium enterprises (MSMEs), which form the backbone of the textile sector. The government is also expected to leverage free trade agreements (FTAs) and engage with multilateral forums like the World Trade Organization (WTO) to resolve the trade tensions and protect export competitiveness.
The labour-intensive nature of the textile sector, heavily dominated by MSMEs, has raised concerns over declining profit margins, potential order cancellations, and job losses. Industry representatives have urged for immediate financial relief measures such as cash support and moratoriums on loan repayments to help businesses withstand the tariff shock. Additionally, fast-tracking FTA negotiations with regions like the European Union is seen as a vital step to cushion the sector against ongoing tariff pressures.
Industry Reactions and Adaptation Strategies
Industry bodies and sectoral associations in India have expressed significant concern over the imposition of tariffs by the United States, particularly the 25–50% tariffs impacting key export sectors such as textiles, gems and jewellery, seafood, leather, footwear, chemicals, and machinery. The Federation of Indian Export Organisations and other groups have highlighted the resulting supply chain disruptions and challenges to competitiveness, emphasizing that these tariff measures go beyond a mere trade dispute and affect broader trade diplomacy dynamics.
The removal of trade preferences under the Generalized System of Preferences (GSP) is expected to heavily impact sectors accounting for approximately 25% of India’s US exports. Small and medium enterprises (SMEs), which constitute over 70% of the textiles, gems and jewellery, and seafood sectors, are likely to face substantial difficulties. For instance, in Surat, where the gems and jewellery industry controls more than 80% of diamond exports, micro, small and medium enterprises (MSMEs) are particularly vulnerable to adverse effects from the tariff implementation. Similarly, SMEs in the chemical sector, holding about 40% of the market share, are also anticipated to confront significant challenges.
Despite these concerns, some industry representatives have expressed cautious optimism regarding resilience and diversification. Officials have noted that while certain manufacturing units might suffer short-term setbacks, the overall export sector is diversified and not entirely dependent on the US market. Past experiences with trade challenges have helped build confidence in the sector’s ability to adapt and overcome current hurdles.
In response to the tariff-induced pressures, Indian exporters and government bodies have initiated a series of adaptation strategies focused on market diversification and enhancing competitiveness. Export Promotion Councils (EPCs) are spearheading efforts to conduct detailed market mapping, identify products with high demand
International Trade and Diplomatic Dimensions
The imposition of tariffs by the United States on Indian textile exports has introduced significant challenges within the international trade framework, affecting not only economic relations but also diplomatic ties between the two countries. The US tariffs, set at 25% on certain Indian imports starting August 1, 2025, target key sectors including textiles, apparel, gems, seafood, chemicals, and auto components, cumulatively impacting approximately $19 billion worth of Indian exports.
These tariffs stand in contrast to the lower rates faced by other competing countries, such as Japan and the European Union at 15%, South Korea also at 15%, Indonesia at 19%, and Vietnam at 20%, raising concerns about diversion of orders and erosion of India’s export competitiveness. The US has justified these measures under presidential authorities including Section 232 of the Trade Expansion Act citing national security, Section 301 of the Trade Act addressing unfair trade practices, and the International Emergency Economic Powers Act. However, the invocation of national security exceptions remains contentious under World Trade Organization (WTO) rules, with critics highlighting potential violations of multilateral trading principles.
In response, Indian industry leaders and policymakers have emphasized the need for diplomatic engagement and strategic negotiation. The government may pursue a combination of bilateral trade agreements, export-linked incentives, and financial support measures such as cheaper credit for micro, small, and medium enterprises (MSMEs) in the textile sector to alleviate the adverse effects. There is also the possibility of escalating the dispute to the WTO to seek resolution, although the organization’s ability to provide swift remedies is questioned given the complex nature of the tariffs and their justification.
The broader geopolitical context adds further complexity. The trade actions underscore a shift from previously cooperative economic relations toward a more confrontational “lose-lose” scenario, as characterized by experts noting the detrimental impact on both economies. Indian exports to the US account for about 20% of the country’s merchandise exports and 2% of GDP, highlighting the substantial economic stake involved. Additionally, the tariffs threaten the livelihoods of semi-skilled workers heavily employed in textiles and gems and jewellery sectors, which have requested government support reminiscent of COVID-19 relief efforts to prevent job losses.
Strategically, Indian exporters face the challenge of reorienting supply chains and markets. Industry voices have noted that the production and export of garments and textiles to the US may shift towards regions like South America, Europe, and Turkey in the short term due to the tariff barrier. Consequently, the conclusion of a timely Bilateral Trade Agreement (BTA) between India and the US is viewed as crucial to mitigating tariff impacts and restoring competitiveness. The negotiation process demands diplomatic flexibility and vision to reconcile economic interests with geopolitical considerations in a rapidly evolving global trade landscape.
In the long run, the tariffs have prompted India to contemplate greater self-reliance and diversification of export destinations to avoid future vulnerabilities. This strategy aims to reduce dependence on the US market and enhance resilience against unilateral trade actions. As India navigates these diplomatic and trade challenges, the outcome will depend on the willingness of both nations to engage constructively and seek mutually beneficial solutions amidst competing economic and security priorities.
Future Outlook
The imposition of 50% tariffs by the United States poses a significant short-term challenge to India’s textile export sector, potentially resulting in a 20-25% decline in exports over the next six months, particularly affecting apparel and made-up goods which constitute nearly 28% of total textile exports. However, despite this immediate setback, the future outlook for the industry remains cautiously optimistic, driven by strategic adaptation and diversification efforts.
Indian exporters and industry bodies are actively exploring alternative markets to mitigate reliance on the US, while the government is supporting these initiatives through Export Promotion Councils (EPCs). EPCs are tasked with market mapping, identifying high-demand products, and connecting specialized production hubs such as Surat, Panipat, Tirupur, and Bhadohi to new opportunities in the top 40 target countries. These efforts include bolstering India’s presence at international trade fairs and buyer-seller meets, conducting sector-specific promotional campaigns under a unified Brand India identity, and guiding exporters on leveraging free trade agreements (FTAs) and meeting global sustainability standards and certification requirements.
The Indian textile industry’s ability to innovate and adapt to evolving consumer preferences will be crucial in sustaining growth despite tariff-induced price increases in the US market. Although a short-term slowdown is anticipated, the sector’s competitive advantage and expanding global footprint — covering exports to over 220 countries — position it well for recovery and growth. India holds a 4.1% share in world textile trade and ranks as the sixth-largest exporter globally, with textiles and apparel comprising about 8.2% of the country’s total merchandise exports for FY 2023–24.
Furthermore, ongoing trade negotiations and the strategic use of FTAs are expected to play a pivotal role in enhancing India’s competitiveness. By aligning exports with global standards and tapping into emerging markets, India aims to offset the impact of the US tariffs. Nevertheless, challenges remain due to disparities in tariff rates faced by competing countries such as Japan, the European Union, South Korea, Indonesia, and Vietnam, which could divert orders away from India.
