Indian MSME exporters are fearing a potential layoff crisis following the United States’ decision to double tariffs on Indian goods, raising the effective duty rate to over 50 percent for certain items. The hike, announced by President Donald Trump and effective in two phases—August 7 and August 27—is expected to impact $50–55 billion worth of Indian exports, industry estimates suggest.
The move specifically affects India’s labour-intensive exports such as textiles, shrimps, organic chemicals, carpets, and gems and jewellery, where India now faces some of the highest effective tariff rates in the world.
India’s total exports to the US stood at $86.5 billion in FY25, making Washington one of India’s largest single-country trading partner.
As a result, some of India’s main export categories like textiles and apparel will now be subjected to nearly 64 percent tariffs, followed by organic chemicals (54%), carpets (52.9%), and diamond and gold products (52.1%), as per estimates from GTRI.
"This move is a severe setback for Indian exports, with nearly 55 percent of our shipments to the US market directly affected," said S C Ralhan, President of the Federation of Indian Export Organisations (FIEO). "The 50 percent reciprocal tariff effectively imposes a cost burden, placing our exporters at a 30–35 percent competitive disadvantage compared to peers from countries with lesser tariffs."
India’s micro, small and medium enterprises (MSMEs), which form the backbone of the export ecosystem, are especially vulnerable. According to government data on unincorporated sector enterprises, over 4 million people are employed in textile manufacturing, while another 11.12 million work in apparel production.
Israr Ahmed, former Vice President of FIEO, warned of massive job losses, particularly in sectors like apparel, textiles, marine products, and footwear, calling them “employment-heavy and margin-thin.”
An exporter, who did not wish to be named, warned of massive job losses in the labour-intensive sectors to the tune of hundreds and thousands if tariffs don’t come down soon.
The Confederation of Indian Textile Industry (CITI) has urged the government to step in. “The US tariff announcement of August 6 is a huge setback for India’s textile and apparel exporters. It has further complicated an already challenging situation,” said CITI Chairman Rakesh Mehra, adding that it will “significantly weaken our ability to compete with countries like Vietnam and Bangladesh.”
India’s exports of ready-made garments to the US totalled $5.3 billion in FY25, according to CITI.
India’s exports of textile and apparel items to the US grew by only 3.3 percent in June percent compared to June 2024, lower compared to India’s earlier growth trajectory and significantly below the growth rates achieved by competitors like Vietnam and Bangladesh, CITI added.
The leather and footwear sectors are also expected to take a hit, with 20 percent of their exports destined for the US. India’s shipments in these categories totalled just under $1 billion in FY25.
Ralhan added that export orders are already being put on hold, as US buyers reassess sourcing decisions. “For a large number of MSME-led sectors, absorbing this sudden cost escalation is simply not viable. Margins are already thin, and this additional blow could force exporters to lose long-standing clients.”
As the trade situation escalates, exporters and industry bodies are calling for urgent intervention to prevent long-term damage to India’s export competitiveness.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
