Indian textile and apparel players are poised to benefit from the first round of Trump's tariffs levied against China, Mexico and Canada. The industry can leverage this shift in trade dynamics to significantly increase its exports to the US, which currently sits at 28 per cent.
The newly appointed Trump administration declared an economic emergency on Saturday, placing duties of 10 per cent on all imports from China and 25 percent on imports from Mexico and Canada, citing national security concerns. The first round of tariffs looms as a threat to textile and apparel exports from China and Mexico, forcing brands to seek alternative sourcing options in countries like Vietnam, Bangladesh, and India.
As per data from the United States International Trade Commission (USITC), China has been the leading supplier to the world's largest textile importer between 2013-2023, followed by Vietnam, Bangladesh and India. But its share of US apparel imports fell from 37.7 percent in 2013 to 21.3 percent in 2023 by value, amid increased cost of procuring and risk due to allegations of forced labour. Analsyts expect the current round of layoffs to position India better in benefitting from the shift in trade dynamics.
"This policy shift is likely to accelerate diversification strategies of global brands, positioning India as a key sourcing hub. So, expect growth for home textiles and garments as India captures a larger market share year-to-date calendar year 2024 (January-November 2024), India’s market share in cotton sheet imports to the US improved to 61.3 percent (up 252bps YoY), in total apparel to 6.0 percent (up 22bps YoY) and in cotton apparel to 9.8 percent (up 49bps YoY), according to brokerage Elara Securities.
India is a major textile and apparel exporting country and enjoys a trade surplus. The bulk of import takes place for re-export or for industry requirement of raw material. As of 2024, exports of ready-made garments to the US stood at 14.3 per cent, according to data from the Apparel Export Promotion Council (AEPC). Key apparel exports to the US include cotton knit and woven shirts, cotton dresses, and babies’ garments.
"India stands to benefit from this shift due to its established textile and apparel industry. In 2023, India exported textile items worth USD 34 billion, with apparel constituting 42% of the export basket. Notably, Europe and the U.S. consumed nearly 66% of India's apparel exports, underscoring the country's strong presence in these markets," said Naveen Malpani, Partner at Grant Thornton.
Apparel producers in India specialise in value-added products that require higher skill levels, such as items requiring hand embroidery or embellishments. Additionally, India’s production of nearly every apparel input, from fiber to accessories, has allowed for vertical integration that appeals to buyers looking to mitigate risk in their supply chains and reduce costs. More than 90 percent of the raw material requirements for apparel are sourced from within the country (India), according to USITC.
"Global brands are increasingly focusing on diversifying their supply chains beyond Bangladesh, exploring multiple sourcing alternatives to mitigate risks and ensure continuity. While India is among several options being considered, its well-established textiles ecosystem, competitive capabilities, and full-stack solutions position it as a key beneficiary of this strategic shift. We believe India’s robust infrastructure and expertise make it a compelling choice for global brands looking to diversify their outsourcing strategies," Elara Securities said in their note published last month.
The United States is the largest single-country apparel importer in the world. In 2023, US imports of apparel totalled $79.3 billion, with the major part being sourced from Asia.
Bangladesh, Cambodia, India, Indonesia, and Pakistan are notable suppliers to the US.
"While this is a positive development, challenges such as high tariff rates on certain Indian apparel categories and compliance with evolving US import regulations may persist subject to negotiations. Addressing these through trade negotiations and supply chain improvements could enhance India’s competitive edge," said Malpani.
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