Trump Tariffs Give Indian Industry a Chance to Recalibrate its Global Textiles Trade Strategy

At 15%, the US is India's biggest trading partner. That's where the comparison with the garment-exporting nations of South and Southeast Asia ends. The US is a lucrative market for all of these countries, but unlike them the Indian economy does not live by exports alone. Plus, the domestic market of India is huge, and an attractive destination for US companies. India, like others, has been bestowed with a reprieve and what happens next depends on how a trade deal is thrashed out.

There are two scenarios. First, the tariff of 27% will stand. Second, the Indian government will bargain hard and the rate will be brought down to a substantial extent. In the first scenario, how does it affect Indian apparel exporters? On a flat rate, small players like Ethiopia, Kenya, Honduras, El Salvador have the baseline 10% rate. And Bangladesh, Sri Lanka, Viet Nam and Cambodia are expected to give in sooner or later. So, India's competitiveness is bound to get affected.

Chandrima Chatterjee, Secretary-General of the Confederation of Indian Textile Industry (CITI) points out that the US is the world’s second largest market of textiles and apparel (T&A) after EU-27 accounting for about 15% of the global T&A exports. For India, the US is the largest market of its T&A exports accounting for about 28.5% of India’s total T&A exports to world (January–November 2024).

Says Chatterjee: "Duty analysis for the top 10 suppliers of T&A products to the US shows that India is in a better position compared to its close competitors like China, Bangladesh, Viet Nam, etc, but competitors like Türkiye, Italy and Mexico are excluded from any reciprocal duty thus giving them a direct benefit.

"The evolving trade landscape necessitates close monitoring of policy responses from competing nations. Some of India's competitors in the textile value chain like Viet Nam, Bangladesh and Cambodia have already started negotiating reduced tariffs for their trade with the US. As a result of these changing dynamics, US imports of top 20 textile items which accounts to about 55% of its total T&A imports from India is likely to take a hit."

Rahul Mehta, Chief Mentor of the Clothing Manufacturers Association of India (CMAI), argues: "At a broad level, this will provide a huge opportunity to the Indian exporter. For years, we have credited the LDC benefit enjoyed by Bangladesh as a crucial element of their phenomenal growth. Well, we shall have the same advantage now in the US markets, vis-a-vis our major competitors! What more can we ask? Yes, there will be some immediate pain, by way of tough bargaining for the orders on hand, but I would say this can be balanced out by long term gains."

For the second scenario, "Yes, the Indian government will try to negotiate and bring the proposed tariffs down, but so will all others. It is too early to say who will finally end up with what—but I feel in such a situation, India will probably end up worse off, because most of the other countries do not have large domestic industries to protect, and so may yield more than India can afford to do," contends Mehta, who is also Managing Director of Creative Garments.

Chatterjee believes, in this context, it is imperative for India to proactively engage with US authorities to negotiate a more favourable tariff regime for Indian exports. 

There are already reports of US companies asking for discounts. This is true as much of India, as it is of the smaller apparel-making nations.

Going by industry feedback, says Chatterjee, "many US buyers are already asking for discounts or cost-sharing to offset the higher tariffs. In several cases, 15–20% of pre-April 9 export orders may still face the new duties, compelling Indian exporters to negotiate under pressure. Indian industry operates at a wafer-thin margin, and it would be difficult for them to absorb such high duties."

CITI is advising textile players to keep a positive outlook since there is reason to believe that India-US textile trade will be an important issue for both countries and hence the negotiations should yield positive results. However, the next few months are going to be volatile, and the biggest challenge will be to maintain cost competitiveness.

Adds Mehta: "As I said, there is bound to be some initial pain. Buyers are notoriously ruthless in using their power, and they will not hesitate this time round. Each exporter will have to find an equitable solution to the best of his ability, but I do feel that export promotion councils will have to create some common strategy and approach to minimise the losses to our exporters.

"On its part, CMAI being a member of the International Apparel Federation (IAF), is trying to reach out to our counterparts—both in the supplying as well buying countries, to try and work out some mutually acceptable solutions where neither the buyer nor the seller goes down under. However, I am not sure what role the government can play in this situation—other than negotiate the best possible deal for our exporters as a whole."

The tariff issue also exposes the problem of being too reliant on the US (even though India is not America's biggest partner, but the US is India's biggest apparel market). Shouldn't India be exploring other markets?

Agrees Chatterjee: "Absolutely, the current tariff development underscores the critical need for market diversification. While the US remains India’s largest market for T&A products, this overdependence introduces systemic risk in the face of unilateral policy actions.

"India should continue strengthening its trade footprint in other important T&A markets such as the EU, UK, UAE, Japan, Australia, while simultaneously expediting Free Trade Agreements (FTAs) with key partners. At the same time, India must also enhance its presence in the premium and sustainable fashion segments where buyers are less price-sensitive and more aligned with India’s growing value proposition in ethical, organic, and circular fashion."

The discourse in the global fashion industry, probably because of its very nature and the way it operates, is dominated by retailers and brands. Therefore, the current discussions about the impact of tariffs have mostly been about apparel sourcing and apparel exporters.

But there's cotton too. And the US both exports and imports cotton. Just as India does. How do the tariffs bode for cotton?

The Executive Director of the Cotton Textiles Export Promotion Council [TEXPROCIL], Dr Siddhartha Rajagopal, says. "The impact of the Trump tariffs on cotton can be analysed from the impact that it has on China and other major buyers. China along with Bangladesh, Viet Nam, Pakistan and Türkiye are large buyers of US cotton. It may also be noted that these countries are leading exporters of textile products. Except Türkiye, the other countries have been slapped with higher tariffs by the US."

Rajagopal continues, "With restricted access in the Chinese and other major markets, the US with its superior extra long staple (ELS) cotton will also seek to diversify its cotton exports. Additionally, if global prices of US cotton decline due to reduced global demand, Indian textile producers can source US cotton at more competitive rates after taking into account the 11% duty imposed on cotton imports in India."

Chatterjee too believes that trade flows would be affected. "Cotton fibre is the largest T&A commodity exported by the US, with China being its top importer. However, the ongoing tariff war between the two is likely to disrupt this trade flow, potentially reducing US cotton exports to China. In response, the US will seek to diversify and identify alternative markets for its cotton fibre." Incidentally, the CITI also runs an initiative called the Cotton Development and Research Association (CDRA).

India and the US share a complementary value chain in cotton-based textile products. Therefore, underlines Chatterjee, there is a significant opportunity for both countries to collaborate by negotiating zero-duty access for select cotton-based textile items—such as apparel, made-ups, and home textiles—that are manufactured in India using US-origin cotton. Such a strategic partnership would create a win-win situation: the US would gain new and stable markets for its cotton fibre, while Indian manufacturers would benefit from high-quality raw material and enhanced market access in return."

The tariffs, according to Rajagopal, are likely to impact the competitiveness of textile products manufactured by competing countries in international markets, offering Indian exporters an opportunity to capture an increased market share. "However, there is also a possibility that US cotton exporters might redirect their focus to other markets, possibly intensifying competition for Indian exporters in those regions. Recently, Bangladesh announced its willingness to import US cotton duty-free in response to the Trump tariffs. Viet Mam is also re-negotiating for a 'zero for zero duty' with the US." While the US doesn’t import much raw cotton, it imports huge volumes of cotton-based end products like garments and home textiles.”

Concludes Chatterjee: "The situation presents both a challenge and an opportunity—for policy recalibration, strategic diplomacy, and long-term rebalancing of India’s global textiles trade strategy."