Impact of US Tariffs on India

Impact of US Tariffs on Indian Textile Sector: Key Points

1. Market Dependency:

   • Indian textile exporters, particularly from the Tiruppur cluster in Tamil Nadu, depend heavily on the US market, exporting garments worth approximately ₹14,000 crore annually.

2. Current Tariffs:

   • The US has imposed a 25% tariff on textiles and additional penalties, severely disrupting India's textile exports and jeopardizing jobs and market share.
   • Indian apparel exporters warn that without a trade deal, these tariffs could lead to permanent loss of market share to competitors.

3. Export Statistics:

   • In 2024, India exported $10.3 billion worth of textiles and apparel (T&A) to the US, constituting 8.21% of India’s world exports in 2023-24.

4. Economic Impact:

   • A 50% tariff on Indian T&A could reduce US import demand for Indian products by $6.6 billion, equating to a 67.8% decrease.
   • Specific impacts include a 95.8% drop in fiber demand, 87.5% decline in yarn, and 82.9% in fabrics.
   • FCategories like made-ups and apparel could see an 85% reduction in US imports, valued at approximately $5.7 billion.

5. Competitive Landscape:

   • The tariff differentials favor competitors such as Bangladesh, Vietnam, and China, which either face lower tariffs or benefit from preferential trade agreements.
   • If tariffs remain high, these countries are likely to gain significant market share at India's expense.

6. Domestic Supply Chain:

   • Approximately 90% of textile inputs are sourced domestically, highlighting the labor-intensive nature of the sector.

7. Recent Government Actions:

   • The Indian government has responded with measures to support the textile sector, including easing duties on raw materials like cotton and addressing quality control issues that affect supply chains.

8. Sector Characteristics:

   • Large firms dominate textile exports, but the negative impacts of US tariffs affect all producers within the industry due to interconnected domestic supply networks.
   • Indirect economic effects could total around $4.6 billion within the textile sector.

9. Call for Immediate Action:

   • The Apparel Export Promotion Council (AEPC) has urged the government for urgent measures to assist the sector, as longer delays could lead to irreparable harm.

10. Long-term Considerations:

    • Exporters have noted that market diversification is not feasible in the short term. Shifting sourcing requires years for compliance and scaling, risking customer displacement.

In summary, the sustained US tariffs present a critical challenge to India's textile sector, with significant economic implications and urgent calls for governmental support to mitigate permanent damage.