Trump's tariff puts Tiruppur knitwear exporters in jeopardy

K M Subramanian, President, Tiruppur Exporters Association (TEA) said that if these US tariffs persist, Tiruppur alone could lose at least Rs 6,000 crore in the immediate future, forcing exporters to seek new markets.

Tiruppur: A fortnight ago knitwear exporters of Tiruppur had much to cheer about. As observed the US firm up tariffs on competitive countries, their confidence that they will have an edge over them rose. The UK trade deal only added to this optimism. They were actually gearing for a 15% increase in revenues, expecting new orders from global brands looking for alternative to crisis-ridden Bangladesh. Several were exploring options for capacity expansion to meet a prospective burgeoning market.

But Trump’s announcement of additional 25% (total 50%) tariff plus penalty for buying oil from Russia, has not just wiped the smile off the faces of these exporters, but threw them into an existential crisis, especially those who are largely dependent on the US market. Already buyers have put their orders on hold, taking a wait and watch stance. 

As it happens, over 30% of Tiruppur’s exports go to the US. EU and UK pick up another 40% of its shipments. The town accounts for over 55% of India’s knitwear exports, recording a revenue of Rs 39,618 crore in the 2024–25 fiscal year. Exporters here aim to boost this to Rs 55,000 crore by 2026–27.

However, the proposed tariff threatens both existing and future opportunities, as competitors like Bangladesh, Vietnam, and Cambodia face tariffs of only 20%. This could encourage US buyers to source from them instead, with Indian knitwear products becoming significantly more expensive.

If these US tariffs persist, Tiruppur alone could lose at least Rs 6,000 crore in the immediate future, forcing exporters to seek new markets, said K M Subramanian, President, Tiruppur Exporters Association (TEA).

“(The earlier) 25% tariff was still manageable because we were only about 5% above many of our competitors like Bangladesh. But nobody can cope with 50%. Fresh US orders are out of the question for now. This tariff will also hurt American consumers, as they are the end-buyers,” he added. 

Thirukkumaran N, CEO, Esstee Exports, explained that exporters could still negotiate with US buyers to share the burden when tariffs were at 25%. But with rates now doubled, negotiations are impossible. “I haven’t heard anything from any of my three US buyers,” he told DH.

There are also concerns about losing European sales, as some US-based clients source for both markets. “High tariffs are not just a simple problem. Why would a US-based buyer still work with us only for Europe? They might shift European sourcing to the same new suppliers,” he said.

R Rajkumar, Managing Director, Best Corporation, whose exports are 80% US-bound, said three of his eight American buyers have already asked him to put orders on hold, while the company is yet to hear from the remaining five.

“Tariffs must come down. There is no other way,” Rajkumar said bluntly. 

“This is a very competitive industry, with average margins of just 7-8%. We simply cannot survive with 50% tariffs. Just a month ago, we were considering expansion. Now we are focused on saving what we have. We hope things will settle soon, but until then, we remain in limbo,” he added.

The crisis has come at a time when the cluster -- which has implemented zero liquid discharge and is recognised for its ecological sustainability -- was expanding both within Tiruppur and beyond. While larger companies like Best International operate factories in Madhya Pradesh and Kenya, smaller firms were planning new units in Tiruvarur, Sivaganga, and Thoothukudi. 

Subramanian, whose US client asked him to hold an existing Rs 25 crore order, and Thirukkumaran believe that early conclusion of a trade agreement with Europe -- which accounts for about 35% of Tiruppur’s exports -- could help offset losses incurred from US tariffs.

“The UK pact and EU trade agreement (still to be signed) will give Tiruppur a competitive edge. We anticipate an exponential increase in export volumes to both regions once the agreements come into force,” Thirukkumaran said.

However, Rajkumar has a different view, emphasising that the sheer volume of US orders and the spending power of Americans make the market irreplaceable.

“In the US, we speak in dozens and the orders come in bulk. But in the UK and EU, it is by piece count. The EU is a difficult market as garment specifications, including fashion trends, vary from country to country. In the US, requirements are more uniform,” he explained.

R K Sivasubramaniam, Managing Director of Raft Garments, agreed, saying, the scale of the US market is unmatched. “US buyers order millions of pieces of the same product, while in the UK the same volume would be split into different designs and styles,” he added. 

Kumar Duraiswamy, Joint Secretary, TEA, said the US tariff will have a ripple effect on Tiruppur since the regional competition will increase as most US exporters, if the tariffs don’t change, might turn to UK and Europe, which will give the buyer an advantage in price point. 

Until the dispute is resolved, the TEA chief urged the government to support the knitwear cluster -- 90% of which comprises MSME units -- by increasing duty drawback, reinstating the Rebate of State and Central Levies and Taxes (RoSCTL), and reducing interest subvention to 5%. 

He also batted for easier access to credit, loan moratoriums where needed, and the reinstatement of the Merchandise Exports from India Scheme (MEIS).

Despite the challenges, exporters remain cautiously optimistic. Tiruppur’s expertise in both core and fashion products may help it weather the crisis, as shifting fashion orders with their strict specifications and rigorous audits to new suppliers is not easy.

Thirukkumaran noted that Tiruppur is the only environmentally friendly knitwear cluster in the world, with strong compliance standards. “Our quality could keep US buyers with us, but only if tariffs are eliminated. If that happens, there will be no stopping Tiruppur,” he said.

Duraiswamy added that the India-UK Free Trade Agreement could double Tiruppur’s UK market share from 10% to 20% within five years. “Political instability in Bangladesh and the risk of it losing its Least Developed Country status, coupled with our quality, could help us gain customers globally,” he said.