ALSO READIndia Inc counts the cost with Trump tariffs in place
“The shift from an expected 10% to 25% tariff is a setback,” said Prabhu Dhamodharan, convenor of the Coimbatore-based Indian Texpreneurs Federation (ITF), which represents the full textile value chain, including spinning units, weaving firms, and exporters of apparel and home textiles.
He, however, added that the industry is hopeful that the ongoing trade negotiations for bilateral trade agreement (BTA) may still alter the final tariff structure.
“Even if the 25% duty continues, India still stays competitive—with a 10% edge over Bangladesh and Cambodia, 5% over Sri Lanka, and 20–25% over China,” he pointed out.
Apparel sector
India’s apparel exports to the US primarily include cotton T-shirts, knitwear, innerwear, activewear, and baby garments. According to industry estimates, prior to the Trump administration’s latest tariff announcement, US duties on apparel from India, Vietnam, and Bangladesh ranged between 10–15% across various categories. Under the latest tariff structure, Vietnam now faces a 20% duty, with transshipments from third countries routed through Vietnam attracting a higher 40% levy. Bangladesh is subject to a 35% tariff, while Sri Lanka’s duty has been reduced from 44% to 30%.
ALSO READTrump imposes 25% extra tariff and penalty on India
China—the largest apparel exporter to the US—had faced a peak tariff of 145% at the height of the US-China trade war. That has since been lowered to 30%, but US officials have warned of an additional 34% hike if a deal is not reached by August 12.
In 2024, the US imported $107.72 billion worth of textiles, including $80 billion in apparel. China held the largest share at 21%, followed by Vietnam (19%), Bangladesh (9%), India (6%), and Sri Lanka (3%).
Rahul Shah, MD of LB Tex, said the textile sector is unlikely to gain much from a marginal tariff difference. “Currently, Bangladesh’s manufacturing cost for garments is about 15% lower than that of India’s. Despite the proposed 35% tariff on Bangladesh from August 1, a 5-10% difference will not give India much competitive edge.”
ITF’s Dhamodharan, however, believes tariffs alone won’t drive sourcing decisions. He said India’s strong domestic ecosystem of raw materials and intermediates offers global buyers a compelling reason to choose Indian suppliers.
The tariff hike has also rattled India’s $6-billion leather export industry, which counts the US as its largest market. Israr Ahmed, former vice president of FIEO, said the 25% tariff will have a massive impact on exports to the US, with the possibility of order cancellations and delayed shipment requests by buyers. “We urge the Indian government to intervene and help bring the duty down to more sustainable levels, at least similar to what Indonesia has managed,” he said.
India’s leather and footwear exports rose 25% to $5.7 billion in FY25, with the industry aiming to cross the $6.5 billion mark this fiscal. The US remains a key destination, accounting for over 20% of India’s total leather exports, which include shoes, handbags, jackets, and leather accessories.
With bilateral trade negotiations underway, both textile and apparel exporters, as well as leather goods manufacturers, are hopeful that India can negotiate a rollback or reduction in tariffs—similar to the concessions given to Sri Lanka and Indonesia. The US had reduced Sri Lanka’s tariff from 44% to 30% while Indonesia’s was lowered from 32% to 19%.
“We hope both sides will engage further to arrive at a stronger, win–win trade deal,” Dhamodharan said.
Shah of LB Tex, meanwhile, believes order volumes for Indian textile players are unlikely to change significantly due to the tariff increase, but added that it would limit growth prospects. “The textile sector will only receive a push with a 20% tariff difference with our competitors, which could be achieved through the ongoing US-India Bilateral Trade Agreement (BTA). If the BTA goes through in September, it would prove tremendously beneficial for the sector,” he stated.
He also noted that the shock from US tariffs could be partly offset by gains under the UK-India Free Trade Agreement (FTA), which eliminates tariffs on textile imports.