US President Donald Trump’s decision to reduce reciprocal tariffs on Indian goods from 50% to 18% has been greeted with widespread relief across India’s textile and apparel industry, even as detailed terms of the agreement are yet to be fully clarified.
India had been among the worst affected countries after Washington sharply raised import duties on Indian goods from 25% to 50% in August last year, citing New Delhi’s purchase of discounted Russian oil as indirectly supporting Moscow’s war effort in Ukraine. The move had significantly eroded the competitiveness of Indian exports in the United States, India’s single-largest market for textiles and apparel.
India now has the lowest tariff rate compared with its neighbours, giving it a clear edge over key competitors, since the US has rescinded the punitive, 25% duty on all imports from India over its purchases of Russian oil as well. Comparable tariff rates stand at around 30%–35% for China, 19% for Pakistan and Indonesia, 20% for Bangladesh, and about 20% for Vietnam.
On the India-US trade deal & reciprocal tariffs and the restoration of India’s cost competitiveness in its largest export market, Confederation of Indian Textile Industry (CITI) Chairman Ashwin Chandran said, “The reduction in tariff to 18% will ensure our textile and apparel exporters are once again in a position to compete effectively in the US market, the single-largest market for India’s textile and apparel exports. This deal will also ensure that factories can run at full steam once more and job creation can get back to previous levels.”
On the tariff advantage India now has over its peers and the ease of pressure on exporters who were earlier absorbing part of the tariff burden through discounts, Pallab Banerjee, Managing Director, Pearl Global Industries Limited opined that “Exporters were giving a discount to US customers to compensate for the penalty tariff. With that gone, India gets a 2% advantage on tariff as compared to competing countries. The last 2 months of Q4 should get relief from this painful bottomline pressure. Q2 of next year onwards India should see an improved top line as well from the US market.”
Given textiles and apparel are among India’s largest employment generators, Dr A Sakthivel, Chairman, AEPC said that “This development is expected to give a strong boost to apparel exports, attract fresh investments across the value chain, and reinforce India’s position as a reliable global sourcing hub. Most importantly, this positive move will help secure existing jobs and create substantial new employment opportunities, particularly for women and the workforce in labor-intensive segments.”
Stressing the need to rapidly expand capacity to keep up with demand, upgrade compliance, audits, and certifications to meet global standards, Sanjay K Jain ICC National Textile Comm Chair said, “We’ll see Indian goods getting 32% cheaper in the US market. With the series of free trade agreements India has made, combined with the India–US deal, we have a very advantageous concessional duty tariff structure with those countries, helping us compete with our neighbours.”
Speaking on how the deal can support scaling up manufacturing, Suketu Shah, CEO, Vishal Fabrics Ltd., said, “The trade agreement provides several opportunities for diversified markets and accelerates scale-up plans for many textile and apparel categories. We think the true impact will be a function of how quickly the changes can be implemented and how well manufacturers can navigate cost and scale.”
