Despite the imposition of 26 percent tariffs on Indian imports to the U.S., textile stocks outperformed in trade on April 3.
The Indian textile and apparel sector is among those with the largest exposures to the U.S. However, these stocks saw sharp gains in trade, as the latest round of tariffs may help Indian exports get more competitive compared to Asian peers.
In FY24, India exported textiles and apparels worth $9.6 billion to the US made about 28 percent of all exports in the category. India has a 6 percent market share in U.S. textile imports, while in comparison, China and Vietnam have a market share of 21 percent and 19 percent respectively.
With the latest reciprocal tariffs, the duties on China have increased by 34 percent, 46 percent for Vietnam and by 37 percent for Bangladesh. India, on the other hand, has only a 26 percent tariff, positioning the textile sector competitively.
"Assuming that the tariffs remains at about 26 percent, we are better off than Bangladesh because we are getting that much of an advantage," noted Ambareesh Baliga, market expert.
Following the update, stocks such as Grasim Industries, Trident, Welspun Living and Vardhman Textiles closed with gains up to 20 percent in trade.
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Emkay Global said, "One of the ways of mitigating this would be to lower India’s tariffs on US cotton imports. India tariffs cotton imports at 11 percent, but the tariff rate for some African nations is at 5.5 percent. While India does not import a lot of textiles/apparel from the US ($400 million in FY24), more than half of this was cotton.
"Given that American cotton is better quality than Indian cotton and higher imports can help tide over times of domestic shortages, India can offer to lower tariffs on US cotton imports in any BTA negotiations as a concession."
On April 2, U.S. President Donald Trump unveiled global reciprocal tariffs at an event at the White House. For India, the President announced 26 percent 'kinder' reciprocal tariffs. Despite US being a significant trading partner of India, Trump has termed the latter as a “tariff king” and “tariff abuser”.
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