Indian textile exporters seek tariff cost sharing as fresh US orders nearly halt

Prime Minister Narendra Modi and US President Donald Trump

India’s textile exporters already reeling from steeper duties are asking US clients to agree to a sharing arrangement by splitting the cost equally at best as fresh orders nearly come to a halt.

This even as US clients are asking them to absorb most of the increase in costs since US President Donald Trump’s 25 percent levy on India is effective from August 7, exporters told Moneycontrol.

Matters got worse after Trump doubled the tariffs to 50 percent. While, the steeper duty only comes into effect on August 27, textile exporters are already seeing new orders coming to a standstill.

One textile exporter said, “at the moment, there is a complete state of confusion, especially at the manufacturing levels, the margins are not large enough to absorb such cost, some buyers are not amenable, supply, otherwise, they will cut off dealings, while some others are agreeing to split costs either 50-50 or 40-60 for the 25 percent levy.”

Some US buyers have also agreed to spread the additional costs for Indian exporters over the next few months, this exporter said.

Another exporter who spoke on the condition of anonymity explained, a 25 percent tariff will be levied on whatever is loaded after August 6, but there is a rush to deliver Indian goods before the additional tax kicks in so that shipments reach American shores before September 17.

This given that Indian exporters have a three-week breather from the additional 25-percent duty imposed by the US on August 6 for Indian goods that were in transit before August 27 and enter American shores before September 17.

While, there is a rush to ship goods to dodge the extra 25 percent tariff, the first exporter cited above said, manufacturing begins for export purposes only once an order is received, “so one can’t frontload too much.”

“But 50 percent is an uncompromising number. This is not a sustainable rate. Apparel exports alone of $6 billion could be immediately at risk.”

Indian textiles and apparel will be subject to nearly 64 percent tariffs (after additional tariffs are implemented) from August 27.

India exported textiles worth over $10 billion to the US in FY25. Total outbound shipments to America stood at over $85 billion in the previous fiscal.

Some exporters are betting on India and the US reaching a trade deal sooner than later so that the burden on tariff can come down.

"Hopefully, the tariffs may settle down to a reasonable figure, around 20 percent," the first exporter said.

India and the US are presently negotiating a Bilateral Trade Agreement (BTA), the deadline for which is Fall of this year.

Trump's fresh tariff move has significantly weakened India's ability to compete with countries like Vietnam and Bangladesh in textiles' exports, a key-labour intensive sector for the country.