Trump tariffs: India’s $10-billion textile, apparel exports staring at margin hit as competition hardens

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India’s textile and apparel industry will have to take a hit to margins to beat competition from rivals such as China, Bangladesh and Vietnam after US President Donald Trump slapped a higher-than-expected 25 percent tariff on Indian goods and an unspecified Russia penalty, stakeholders said on July 31.

India’s 25 percent tariff is lower than China’s 30 percent and Bangladesh’s 35 percent, but these countries can resort to deep price cuts, making it tougher for New Delhi to scale its exports to the US, the stakeholders said.

At 20 percent, Vietnam has an edge over India and the other two countries.

The US is India’s largest textile and apparel export market. In FY24, the US imported textiles worth $10.05 billion from India, accounting for 28 percent of its exports.

Apparel makes up the largest share of the export pie, followed by home textiles and made-ups such as bed linen, carpets, towels, table mats, aprons, napkins, curtains and upholstery.

Slowdown in apparel exports imminent

The US accounted for 33 percent of India’s garment exports in 2024. It imports apparel worth $80 billion and China accounts for 21 percent of these, followed by Vietnam (19 percent), Bangladesh (9 percent), India (6 percent)  and Sri Lanka (3 percent).

Sudhir Sekhri, Chairman of Apparel Export Promotion Council (AEPC), told Moneycontrol that apparel or ready-made garment exports to the US alone stood at $5.1 billion in FY25.

“Apparel exports are expected to slow down till the announcement of an interim bilateral trade agreement, hopefully in October-December 2025. The tariff of 25 percent on India is certainly higher than what we expected, but we should not be overly worried as well,” he said.

The penalty is “a grey area” which could put India at a disadvantage. “We hope the government of India will negotiate this penalty within a few days,” he said.

India ranks fourth among the US's ready-made garment importers, and cotton t-shirts (9.71 percent) are its biggest import in the category. Women's or girls’ cotton dresses are next (6.52 percent), followed by baby cotton garments (5.46 percent), data provided by APEC shows.

China is the top exporter, with a market share of 21.9 percent in FY24, down from 27.4 percent in FY20. China, Vietnam and Bangladesh together accounted for 49 percent of American apparel imports in FY24.

Orderbook values to erode by 10-20 percent

Vikas Singh Chauhan, Director, Home Textile Exporters Welfare Association (HEWA), said an estimated $200–600 million worth of orders are likely to be hit “by this sudden announcement” of a 25 percent tariff.

“The new tariffs are expected to reduce exporters’ order book values by 10-20 percent and erode profit margins by approximately 10 percent,” Chauhan said. The tariff advantage between India and China has now narrowed significantly. The short-term advantage that India enjoyed has effectively disappeared, he said. The development would pose significant challenges in the coming days, as Christmas season dispatches are also in the queue, Chauhan said.

HEWA has urged suppliers to diversify to markets such as the UK, the UAE, Saudi Arabia, other Gulf countries and the African nations with which India has trade agreements.