The Loom Tightens:
By Perfect Sourcing Bureau | August 2025
In a major trade policy jolt, the U.S. government has proposed a 25% tariff on textile and apparel imports from India, citing trade rebalancing, national security concerns, and alignment with its domestic manufacturing agenda under the Made in America push. The move, still in its review phase, could have far-reaching implications for India’s $10.6 billion textile and apparel exports to the U.S., which is India’s single largest market in this sector.
The Immediate Shockwaves
The proposed tariff hike comes at a time when global demand is already subdued and fashion brands are optimizing supply chains to control costs. India, being one of the top suppliers of cotton garments, home textiles, and made-ups to the U.S., stands to lose cost competitiveness if the duties are imposed.
Key risk areas:
- Cotton Garments (T-shirts, shirts, dresses): Price-sensitive and heavily sourced from India by U.S. mass retailers.
- Home Textiles (Bedsheets, towels): India commands a dominant share but faces stiff competition from Pakistan and Bangladesh.
- Yarns and Fabrics: Could lose share to Latin American or Southeast Asian nations benefiting from regional trade pacts.
The Impact
- Increased Costs and Reduced Competitiveness: The 25% tariff, which comes on top of existing US import tariffs of 6-9% on Indian textile products, will significantly increase the final cost of Indian textiles and apparel in the US market. This combined duty, potentially reaching 31-34% (and possibly more with additional penalties), makes Indian products less competitive compared to those from countries like Bangladesh (20%), Vietnam (20%), Indonesia (19%), and Cambodia (19%), which face lower duty rates.
- Loss of Market Share: The US is India’s largest export market for the labor-intensive textile and apparel industry, with India exporting approximately $10.91 billion worth of products in FY25. The steep tariff could lead to a diversion of orders to other countries, impacting India’s share in the US garment import market, which grew from 4.5% in 2020 to 5.8% in 2024.
- Pressure on Margins and Potential Layoffs: Indian apparel exporters are already facing pressure and may have to sell below cost to keep their factories running and avoid mass layoffs.
- Disruption of Supply Chains: The tariffs could disrupt critical supply chains, delay shipments, and distort pricing, putting immense pressure on every part of the value chain, from workers to large manufacturers.
- Stock Market Impact: Textile stocks in India, such as Vardhman Textiles, Kitex Garments, Gokaldas Exports, Indo Count Industries, and Welspun Living, have seen declines following the tariff announcement, reflecting investor concerns about the sector’s future.
Strategic Reactions by Indian Exporters
Indian companies are already exploring mitigation strategies:
- Nearshoring production via joint ventures in tariff-exempt countries like Mexico or the UAE
- Increasing focus on EU, Middle East, and Japan where trade terms are favorable
- Investments in synthetic blends and technical textiles, which may have lower sensitivity to price hikes
- Lobbying for a bilateral trade deal or sector-specific exemption
What Could Cushion the Blow?
- FTA with the U.S. or Inclusion in IPEF: Strategic trade diplomacy could carve out sector-specific tariff relaxations.
- Strengthening India’s USP: Eco-friendly, organic, and traceable apparel can justify premium pricing.
- FTA with UK and EU: These deals, already signed, can help diversify export dependency from the U.S.
| Metric | Value (2024–25) |
| India’s Total Textile & Apparel Exports | $39.2 Billion |
| Exports to U.S. | $10.6 Billion |
| Share of U.S. in India’s T&A Exports | 27% |
| Expected Loss if 25% Tariff Applies | $1.5–2 Billion |
While India has weathered many trade challenges in the past, the imposition of a 25% tariff by the U.S. could set a dangerous precedent unless proactively addressed. The current situation is a reminder of the urgent need to:
- Diversify export destinations
- Move up the value chain
- Strengthen supply chain agility
- Accelerate trade negotiations at the highest diplomatic levels
Feedback from Industry
“Whilst the announced levy of 25% does come into effect, it would indeed be a surprising twist to our expectations on the way the trade talks were proceeding. However, having seen the several about turns on the tariff front in the case of other countries, I would not press panic buttons right now. But, if the proposed terms do come into effect, It will make our products 7% to 10% more expensive than some of our competitors, and it will certainly hurt our Apparel exports to the US. Fortunately, this set-back has come at the time when we have just signed an FTA with UK, and are proceeding rapidly with an FTA with EU. So yes, it is tough times, but not beyond our ability to face.”
Rahul Mehta, Chief Mentor, CMAI
“Big change in verbally announced rates for most countries & finally declared rates that will come in effect from August 7th, 2025. Seems many nations at the last minute negotiated well to get their tariffs reduced in the nick of time. India is at disadvantage to majority competitors including Pakistan, Vietnam, Bangladesh, Turkey and thus India Govt needs to strongly counter on front foot & protect industry especially MSME by announcing a 5% incentive on exports to USA from immediate effect on goods where 25% tariff is imposed.”
Sanjay Jain, MD, TT Limited
“The tariff of 25% is higher than what we expected but we should not be overly worried as long as Vietnam and Bangladesh tariffs are not revised downward from the current levels. Apparel exports are expected to slow down till the announcement of an interim BTA, hopefully to conclude in October-December 2025. The penalty is a grey area and we hope the Government of India (GOI) will negotiate this with the US before 1st August 2025.”
Sudhir Sekri, Chairman, AEPC