The impact will be particularly severe on MSMEs and labour-intensive units, which have limited ability to absorb tariff costs, leading to risks of underutilisation and delayed shipments. (Image for representational purposes.
Credit: DH File Photo
Bengaluru: The imposition of 25 per cent tariff along with an unspecified penalty by the United States, is likely to severely impact India’s exports of textiles and apparels (T&A) to the US market. It is also expected to make importers hold back on placing new orders.
“This development has created considerable uncertainty among US buyers, who are currently unclear about the final tariff structure that will be applicable. As a result, many importers have adopted a cautious approach and are holding back on placing new orders,” A Ravikumar, Executive Director, Manmade Fibre and Technical Textiles Export Promotion Council (MATEXIL), told DH.
Further, several US buyers have advised Indian exporters to suspend shipments even against confirmed export orders until further clarity emerges. This abrupt disruption in trade is expected to cause significant financial losses to exporters and may also impact the production pipeline and employment within the textile sector, he said.
In the immediate term, American retailers may delay or scale back orders as they reassess cost structures, leading to a dip in purchase volumes.
This steep tariff increase puts immense pressure on Indian exporters, many of whom operate on wafer-thin margins. Exporters may be forced to either absorb the additional costs - hurting profitability - or pass them on to US buyers, which could further dampen demand.
The impact will be particularly severe on MSMEs and labour-intensive units, which have limited ability to absorb tariff costs, leading to risks of underutilisation and delayed shipments, said Siddhartha Rajagopal, Executive Director, The Cotton Textiles Export Promotion Council (TEXPROCIL).
During the initial stages of tariff negotiations, textile hubs such as Tirupur witnessed a temporary surge in buyer interest as importers rushed to advance shipments before duties escalated.
However, Indian exports of textiles and apparels to the US - valued at Rs 9,34,14,79,85,000 crore ($10.7 billion) and accounting for 29 per cent of India’s total exports of textiles and apparels - is at a risk of losing its competitive edge.
“To mitigate the impact of US tariffs and reduce dependency on the US market, India must strategically look at diversifying its export markets by expediting the conclusion of Free Trade Agreements (FTAs) with the EU and Canada. Further, India should also look at the options of exporting T&A products in the high value niche segments,” Rajagopal added.