Trump's 26% tariff on Indian textiles shakes up global trade, but is it a curse or an opportunity?

The US President Donald Trump's 26% reciprocal tariff on India, effective from April 9, will cause a significant shift in global textile and apparel trade dynamics, both positively and negatively impacting India, say experts.

With 35% of India’s apparel exports headed to the United States, the additional ad valorem tariff significantly raises costs, making Indian products less competitive, says A Sakthivel, Vice Chairman of Apparel Export Promotion Council (AEPC).

India exported textile and apparel products worth about $10.5 billion to the U.S. in 2024. The US imported textile and apparel worth $107.723 billion in 2024, a 2.66% increase from 2023. China and Vietnam were the leading suppliers, accounting for 24.20% and 15.15% market share, respectively. The highest import growth were from Cambodia (14.44 %), Pakistan (7.28%), India and Vietnam (5.61%), say sources.

Turkey and Brazil, key competitors of India, are expected to face a lower 10% tariff, making it a more attractive sourcing option for US buyers. This could lead to a shift in trade flows, further impacting India’s export share. India’s major competitors in the European Union, such as Italy, Germany, and Spain, face a 20% tariff, which is lower than India's 26%. This will negatively impact India’s apparel exports. However, those countries are mainly importing from India, which is an advantage for India.

However, the new tariffs also throw open many opportunities for Indian apparel exporters. Key major competitors for India, like Sri Lanka (44%), Vietnam (46%), Cambodia (49%), Bangladesh (37%) and China (34%) face significantly higher tariffs. Comparatively, India, with a lower 26% tariff, become more attractive to US buyers.

India's market share in the global textiles market, worth $1825.76 billion in 2024, is only about 4%. Compared to this, Vietnam has 6.4%, Bangladesh (16%), and China controls about half (over 50%) of the global apparel and textile trade. The other major countries are Turkey, Italy, Germany, the US and Thailand.

Trade sources clarified that these duties will apply to all imports under existing U.S. trade agreements, unless otherwise specified. India will face a 26% country-specific ad-valorem duty that is imposed in addition to any existing duties, fees, taxes, or charges on imported goods, unless specified otherwise. For example, with T-shirts, the current tariff rate is 16.5%, and with the new tariff, it would increase to 42.5%. However, compared to the main competing countries, the tariff will be lower for Indian exporters.

India, the sixth-largest exporter of textiles and apparel, exported textiles and apparel worth $34,072 million in FY24. Of this, 35% of exports are to the US and contributed 8.1% of India's overall exports, worth $43,7072 million. Apparel constitutes 42% of the export basket, followed by raw materials/semi-finished materials at 34% and finished non-apparel goods at 30%.