U.S. tariffs to shave off 5-10% revenue of domestic textile manufacturers: Crisil Ratings

Domestic textile manufacturers are headed towards challenges due to the penal tariffs imposed by the U.S. According to Crisil Ratings, textile manufacturers are bracing for a 5-10% decline in revenue, apart from reduction in operating profitability as the 50% tariffs imposed by the U.S. came into effect on August 27, 2025.

Exports of home textiles account for about three quarters of the industry’s revenue, it added.

Crisil Ratings, however, said three factors may reduce the impact. "Three factors would soften the blow somewhat—frontloading of sales during April-August 2025; limited capacities of competing nations, such as China, Pakistan and Turkey with lower tariffs in the product categories supplied by India; and, likely diversification of Indian manufacturers to alternative geographies," it added.

"Additionally, deleveraged balance sheets will partly offset the impact on credit profiles," it said.

"Our analysis of about 40 home textile companies, which account for 40-45% of the industry revenue, indicates as much," said Manish Gupta, Deputy Chief Rating Officer, Crisil Ratings,

"Home textiles are discretionary products and their exports to the U.S. grew a modest 2-3% in the first quarter of this fiscal as retailers remained cautious of demand amid inflationary concerns. But prior to the implementation of higher tariffs from August 27, exports had spiked because of some frontloading of orders," he said.

"Additionally, with competing countries having limited capacity to make cotton-based home textile products, India should be able to maintain its competitive position in the U.S. market over the near term. That should limit the overall revenue decline for the industry to 5-10% this fiscal,” he added.

Crisil pointed out that the impact is expected to be more pronounced for companies that generate more than half of their revenue from the U.S..

"To offset the lower offtake in the U.S., Indian manufacturers would try to increase trade with the European Union (EU) and the United Kingdom (UK). These geographies together accounted for 13% of India’s home textile exports last fiscal," Crisil Ratings said.

"Domestic exporters are expected to sharpen focus on the UK, where the gates have opened after the recent free trade agreement, and the EU," said Gautam Shahi, Director, Crisil Ratings.

“Scaling up of revenue from the alternative export destinations will take time. Meanwhile, operating profitability on exports to the U.S. over the remainder of this fiscal may decline sharply. This will be a result of the Indian exporters absorbing part of the higher tariffs and some expected reduction in demand from the U.S. due to inflation," he added.

"The potential oversupply may also affect the profitability of exports to other destinations as well as in the domestic market. Consequently, operating profitability at the industry level could fall 200-250 bps this fiscal from last fiscal," Shahi added.

Crisil Intelligence observed that the industry's ability to navigate these challenges will depend on continuation of higher U.S. tariffs on India versus competing nations, policy support from the central government, demand trends in the U.S. given inflationary pressures, and cotton prices.