50% US tariffs cripple Tiruppur knitwear hub, triggering Rs 3,600-crore losses and labour slowdown

Tiruppur: Rs 3,600 crore is what this knitwear cluster has lost since October, with fresh orders from buyers in the US drying up due to the 50% tariffs on Indian imports. This is in addition to the losses that exporters suffered after shipping finished goods to the US by offering steep discounts of 20-25% to buyers, following the tariffs coming into effect in August this year.

The loss of business from the US – in addition to the 50% tariffs, exporters have to pay a 16% duty – has forced many companies in Tiruppur, which primarily catered to the American market, to scale down operations, resulting in reduced work hours for labourers.   

Thousands of migrant labourers who went to their hometowns in Bihar, Odisha, and Uttar Pradesh for the festive season have not returned as yet. Exporters said there are no major layoffs for now, since labourers who do not have work are being absorbed by other factories that are running at full or near-full capacity. 

Over 30% of Tiruppur’s exports are shipped to the US, and this major textile hub in Tamil Nadu accounts for over 55% of India’s knitwear exports, with the cluster recording a revenue of Rs 39,618 crore in the 2024-25 fiscal.

“The Tiruppur knitwear cluster’s monthly business with the US is about Rs 1,200 crore and we have lost it entirely as fresh orders are not forthcoming. No one can afford 50%,” Kumar Duraiswamy, Joint Secretary, Tiruppur Exporters’ Association (TEA), told DH.

“If the situation persists and is not resolved in the next few months, the losses incurred could be between Rs 10,000 crore and Rs 15,000 crore,” Duraiswamy added. 

If the standoff with the US is not resolved at the earliest, exporters fear that the buyers will shift to suppliers in their competition markets like Vietnam, Bangladesh, and Cambodia, which could threaten the existence of many players, especially in the MSME sector. 

An exporter, on the condition of anonymity, told DH that one quarter has completely gone, with many players being forced to look for other markets like the UAE, which is also “over-crowded”. 

“We incurred heavy losses due to the 20-25% discounts we offered to our US buyers to get them to accept our goods. With no repeat orders, we are incurring further losses. All potential markets have been explored and we don’t want to get into risky markets like Africa,” the exporter added. 

Duraiswamy and Raja M Shanmugham, past president of TEA, said it will be very difficult to get orders back from US buyers, once they shift to other countries, as they will get comfortable with those suppliers. 

“US exporters are not getting repeat or fresh orders and there is a possibility that they might lose the buyers. Once the buyers find new suppliers, it is hard to get them back again,” Duraiswamy said. 

Shanmugham felt that the US tariff crisis has also made business difficult for those dealing with other markets as well, with large companies now invading the European market by under-quoting existing prices to EU buyers. 

“Big players are switching over to these markets by under-quoting prices, making many in the MSME sector vulnerable and forcing them to the brink. When they quote a lower price, the reputation of the existing suppliers is affected with the buyer. They renegotiate the price, which will make MSMEs bleed as we already survive on wafer-thin margins,” Shanmugham added. 

Duraiswamy said no number of new markets can ever replace the US market due to its sheer size and volume of orders. “It is easy to ask us to explore new markets, but the bowl size is the same. We can’t find new markets that can replace the US. American buyers order millions of pieces of the same product, while in the EU, the same volume would be split into different designs and styles,” he added.

‘Centre must help’

Besides the losses, the exporters are upset that the Union Government has not come forward to help the sector offset at least a portion of its losses due to US tariffs.

Shanmugham felt that since this crisis was spawned by geopolitical issues, the government should handhold the knitwear sector, especially the MSME segment, by subsidising the differential tariff gap with competitor countries. 

“If such a thing is done, the exporters will be able to retain their buyers in the US and offset their losses. We need such extraordinary steps,” he said. 

Duraiswamy pitched in to say the situation was much worse than during the Covid-19 pandemic, and the government should come out with relief measures to help the sector. 

“At least during Covid pandemic, we had business coming in and we repaid our loans. But now, we don’t have business at all. We want the government to help us sustain it. They should give us a 20% EXIM scrip to enable us to survive and retain buyers. If the government helps us, we can consider accepting new orders,” he added.