Textile exports: Advantage India for now as competitors face higher tariffs | Mint

The universal and reciprocal tariffs that US President Donald Trump announced on 2 April have put the Indian textile sector, especially apparel exports, at a relative advantage vis-a-vis its peers. 

That’s because the US has levied higher tariffs on India’s main competitors. Vietnam will suffer a 46% tariff on all exports while Sri Lanka will have 44% tariffs and Bangladesh 37%. China, the biggest exporter of textiles to the US, will have to pay 54% more (34% reciprocal tariff plus the 20% tariff levied after Trump returned to office in January). 

In comparison, Indian exports will face a 26% tariff. The lower tariff will significantly improve India companies’ competitiveness in the US market. India’s textile exports to the US – comprising apparels, home textiles and others – were around $10 billion in FY24.

Also read: Indian pharma companies escape Trump’s reciprocal tariffs, for now

“At this stage, India holds a clear tariff advantage in apparel exports over key competitors like Vietnam and Bangladesh,” said Prabhu Dhamodharan, convenor, Indian Texpreneurs Association, a textile entrepreneurs body based in Coimbatore.

The US imports apparel worth $80 billion and China accounts for 21% of this, followed by Vietnam (19%), Bangladesh (9%), India (6%) and Sri Lanka (3%). 

The immediate impact of the tariffs could be a slowdown in consumption. “Consumers in the US will see a sudden jump in prices as retailers pass on the cost of tariffs. This will result in lower consumption and consequently, lower imports,” Dhamodharan said. In the medium to long term, India is better placed, he added. “With some strategic trade negotiations, India can further capitalise on this trend and solidify its position in the US apparel market,” he added.

Who’ll capture China?

The biggest question on everyone’s mind is who will capture China’s market. Chinese textile exporters will have to pay a staggering 54% tariff on exports to the US. They will also have to pay a higher duty on cotton imports from the US that China imposed in retaliation to earlier duties. This all but prices them out of the US market. 

The Indian government, which is discussing a bilateral trade agreement with the US, had hoped to escape the reciprocal tariffs. It had even reduced duties on certain items such as motorcycles, whiskey and wines. But Trump, who had repeatedly called India a ‘tariff king’, decided to impose a ‘discounted’ reciprocal tariff of 26%. The textile industry was also betting big on the ‘zero-for-zero’ tariff initiative, which involves identifying specific tariff lines or product categories where India can eliminate import tariffs without negatively impacting its domestic industry.