The Impact of US Tariffs on India’s Textile Industry

The recent imposition of a 50% tariff on Indian textiles by the United States has sent shockwaves through India’s textile sector, which is one of the country’s most significant industries. This development has led to halted orders, strained supply chains, and an uncertain future for millions of workers in a sector that is crucial to the Indian economy.

Tariff Overview

The US tariffs, which took effect in early August 2023, have significantly impacted India’s textile exports. With the US imposing a two-tiered levy—initially a 25% tariff followed by an additional 25%—the burden on Indian exporters has become increasingly severe. Prior to this, India had been in a competitive position, with hopes of expanding its share of the $16 billion US apparel market. However, the new tariffs have placed India at the highest tariff tier compared to its competitors, including Bangladesh, Vietnam, and Pakistan, which enjoy much lower rates.

Industry Response

Vinod Dhamija, president of the Haryana Chamber of Commerce and Industry, noted that some industry owners are now reconsidering their supply chains. They are exploring options to reroute exports through countries like Bangladesh or Vietnam, where they can carry out minimal value addition before shipping to the US. This strategic shift could have long-lasting implications for India’s textile industry.

Dhamija highlighted the immediate consequences of the tariffs: “We have not received any fresh orders since the announcement,” he stated. Smaller brands that previously sourced from Indian manufacturers are now halting orders, while larger brands are demanding that producers absorb a portion of the tariff burden. This has led to a significant reduction in profit margins, putting many businesses in a precarious position.

Regional Impact: Tiruppur and Tamil Nadu

The city of Tiruppur, located in Tamil Nadu, is particularly hard-hit, accounting for 68% of India’s knitwear exports. The sudden halt in orders has been devastating, especially as the region had been preparing for a rebound in US demand. Many exporters had invested in new machinery, anticipating growth from a potential India-UK free trade agreement.

Kumar, a worker in Tiruppur, expressed uncertainty about his future. Having worked in the industry for nearly a decade, he now fears for his livelihood as production plans are being reconsidered. “I don’t know,” he said, reflecting the anxiety felt by many in the sector.

Mary Anuklatham, from Social Awareness and Voluntary Education, pointed out that many workers in the textile industry are home-based, with a significant number being women. The immediate effects of the tariff are not yet visible for these workers, but if the situation persists, it could lead to dire consequences for those who already earn less than a dollar a day.

Declining Orders and Market Dependency

Rajesh Kumar, who manages a textile unit, reported a 30% drop in yarn orders since the tariffs were announced. The US is one of India’s largest textile markets, and in 2024, India accounted for approximately 6% of US apparel imports, valued at $4.8 billion. This figure represents nearly a third of India’s total apparel exports, underscoring the importance of the US market to Indian textile manufacturers.

In Ludhiana, a major textile hub in Punjab, the situation is similarly grim. The city exports approximately $700 million worth of hosiery and knitwear to the US annually, employing over 500,000 workers. The imposition of tariffs has raised serious concerns about job security and the sustainability of businesses.

Industry Leaders Warn of Catastrophe

The Confederation of Indian Industry (CII) has raised alarms about the potential devastation caused by the tariff hike. Amit Thapar, chairman of CII’s Northern Region Export Promotion Committee, characterized the tariffs as a “death knell for our competitiveness and survival.” He emphasized that even the raw materials sourced from abroad are now subject to these levies, complicating the situation further.

Ashwin Aggarwal, who oversees garment exports at Nahar Industries, noted that business has slowed dramatically since the tariffs took effect. The company, which supplies to major US brands like GAP and Tommy Hilfiger, has seen its export volumes shrink as a direct consequence of the tariff imposition.

Rakesh Kumar Goyal, who operates an industrial unit in Panipat, was in discussions to expand his market reach to US retailers such as Walmart and H&M before the tariffs derailed those plans. The uncertainty surrounding future orders has left many businesses in a state of limbo.

Call for Government Intervention

Tamil Nadu Chief Minister MK Stalin has appealed to Prime Minister Narendra Modi for urgent intervention. The state relies heavily on the US market for its textile exports, and the uncertainty surrounding future orders is stifling local production plans. “Until that clears, new production cannot be planned,” Stalin said, highlighting the urgency of the situation.

As the textile industry grapples with these challenges, other textile-rich regions in India, including Surat, Bikaner, and Coimbatore, are also facing precarious conditions. The ripple effects of the US tariffs are felt across the country, threatening not just profits but the livelihoods of millions.

Conclusion

The imposition of a 50% tariff on Indian textiles by the United States has created a crisis within India’s textile industry, which is vital to the country’s economy. As businesses scramble to adapt to the new reality, the potential for job losses and economic downturn looms large. Without timely intervention, the future of India’s textile sector hangs in the balance.

Key Facts

– The US has imposed a 50% tariff on Indian textiles, affecting exports significantly.
– India was previously positioned to expand its share of the $16 billion US apparel market.
– The textile sector contributes 2.3% to India’s GDP and employs over 45 million people.
– Tiruppur accounts for 68% of India’s knitwear exports, now facing halted orders.
– Tamil Nadu Chief Minister MK Stalin has called for urgent government intervention to address the crisis.

Source: www.aljazeera.com