“At 50%, it can’t go on”: Trump’s punitive tariffs put Indian textile exports and jobs at risk

Fresh orders have come to a halt even as exporters rush to ship goods before the tariffs double.

"We are now in damage control mode," said Kumar Duraiswamy, joint secretary of the Tiruppur Exporters Association, India’s largest knitwear hub. His remark reflects mounting concern as US tariffs on Indian goods are set to double, a move that could upend an industry that employs millions of low-income workers.

In Tiruppur, exporters are racing against the clock. Shipments, that are worth nearly Rs 2,000 crore monthly, are being rushed to ports in a last-minute bid to beat the August 27 deadline, when US tariffs on Indian goods double to 50 percent. Once consignments are loaded and cleared for shipping, they can escape the higher duty.

“We have been grappling with the situation since morning because 50 percent tariffs are expected to roll out tomorrow. No one has a solution for textile goods that land in the US after September 17, until which we can escape steeper duties,” Chandrima Chatterjee, Secretary General of the Confederation of Indian Textile Industry (CITI), told Moneycontrol.

Textile exports worth as much as $11 billion to the US will face a near embargo under President Donald Trump’s punitive duties, driven more by geopolitics than trade. The move threatens to shutter factories and displace millions of low-income workers in India.

“Discussions with buyers for workable solutions are on for garments in production. Orders in fabric form, or orders that are a work in progress, have been kept on hold. Whatever garments have been produced, importers want the goods; we also don’t want to keep the goods, so some solution will be worked out. We want to minimise the damage,” Duraiswamy said.

Almost 28 percent of India's textile and apparel exports go to the US, accounting for nearly 2 percent of the country's GDP. And, above all, it is one of the biggest generators of jobs and livelihoods here.

Mumbai-based Creative Group, which specialises in both woven and knitted fabrics and apparel, is holding management meetings to come up with a solution to “a crisis we were never prepared for,” says Chairman Vijay Kumar Agarwal.

Agarwal says that the Group may have to close at least two factories out of the eight, leading to job losses for around 6,000 to 7,000 workers. This given that around 85 percent of their products head to the US.

“We will have to close down a few factories, we have to give discounts to buyers, at 50 percent it can’t go on for long, export of textiles from India to the US will probably not exist apart from some high-value items. Honestly, we are at a loss,” Agarwal told Moneycontrol.

According to industry estimates, the combined direct and indirect employment generated by the Indian textile and apparel sector is in the range of more than 100 million, while the average salary of a machine worker in a garment factory is between Rs 15,000 and 18,000 per month.

Orders halt

Fresh orders from US buyers have come to a halt even as exporters rush to ship goods before the tariffs double.

CITI’s Chatterjee tells Moneycontrol that US clients have stopped placing fresh orders given the uncertainty unleashed by steeper tariffs.

At 25 percent, orders were still trickling in as exporters and clients tried to split the cost to absorb the impact of the duty. But, at 50 percent, there is silence from American buyers, industry lobby groups and exporters say.

“We are not working on luxury margins. The margins are razor thin; we can’t accept new orders,” Duraiswamy said.

Past president of the Clothing Manufacturers Association of India (CMAI) Rahul Mehta describes the situation as that of “stress and uncertainty”.

“Either dispatch before August 27, or you hold on to it. New production, they won’t get into it. New orders will see an impact. Will buyers accept higher prices or not is the question. Ultimately, American consumers will have to pay for the higher price,” Mehta said, adding that apparel shipments worth $3-3.5 billion annually are at risk.

Chatterjee too says that at 25 percent, the industry was somehow finding ways to manage continuity of orders, but from today, most orders have halted.

Currently, most Indian goods to the US face a tariff rate of 25 percent.

India’s textiles and apparel exports to the US in 2024-2025 were $10.8 billion, with apparel alone accounting for $5.3 billion. The effective tariff rate is now expected to rise to 63.9 percent from August 27.

The US is a critical buyer of Indian apparel, with key hubs like Tiruppur (knitwear), Noida and Gurugram (fashion garments), Bengaluru (woven or knits), Ludhiana (woolen or fleece), and Jaipur (ethnic or fashion) heavily dependent on American orders.

SC Ralhan, president of the Federation of Indian Export Organisations (FIEO), says the impact is quite visible and exporters are in a fix.

“Whosoever is under 50 percent is trying to get discounts. Someone is offering 10 percent, others 5 percent. No new orders are coming in; most orders have had to be put on hold because the importer does not want to pay 50 percent. Many clients will head to Vietnam, China and Bangladesh,” Ralhan said.

India’s competitors in the textile sector are facing lower tariffs from the US, with Vietnam and Bangladesh placed at 20 percent.

Still hopeful

Even with a day left for steeper duties to kick in, India’s textile industry is hopeful that the government would do more to support the sector and will wriggle out a solution to remove the extra 25 percent burden.

Creative Group’s Agarwal believes that the India-US relations are too crucial for tariffs to remain at 50 percent.

“I believe this won’t continue for more than three to four months, this is more geopolitical than a trade issue, I hope some solution will come,” he said.

CITI’s Chatterjee too expects the government to soon come out with a policy roadmap since both exporters and buyers need clarity.

Some are betting on alternative destinations from Africa to Australia.

Agarwal says, “our share in Europe is hardly 5-6 percent and 15-20 percent in Australia. We need to diversify exports to these markets since there is a huge scope for it.”

But others warn that diversifying exports is only a medium-term solution.

CITI Chairman Rakesh Mehra said that Indian textile companies are already engaged in diversification efforts to reduce their dependence on the US market, but that solution will take time to materialise.

“The industry is doing all it can to mitigate the impact of the high US tariff, but then again, developing new markets and new clients takes time and cannot be done overnight. The importance of the US for our textile and apparel exporters can never be undermined,” Mehra added.

India has fast-tracked negotiations for a trade deal with the European Union as well as for expanding the existing pact with Australia. New Delhi’s agreement with the UK is also expected to be implemented sooner rather than later, wherein the country’s textile exports will benefit from zero duties.

The government has already scrapped an 11 percent duty on cotton to shield the sector from 50 percent US tariffs that would leave Indian products uncompetitive in India’s largest export market.

It is also expected to quickly roll out the Export Promotion Mission worth around Rs 2,500 crore, among other measures, to help exporters tackle steeper duties.

Fears of job losses, factory shutdowns and the reality of stalling orders aside, exporters and companies remain united in their support for their country as India drew red lines on agriculture and dairy in talks with the US, leading to uncertainty over the future of the proposed Bilateral Trade Agreement between the two.

As Creative Group’s Agarwal puts it, “we have to stand by our country in such challenging times.”