Trump’s Tariffs Cast a Shadow Over India’s Textile Sector

India’s textile sector, a cornerstone of the country’s economy and employment, finds itself at a crossroads amid rising global trade tensions. US President Donald Trump’s announcement of reciprocal tariffs has stirred unease within the industry, which is now grappling with uncertainty about the future of its exports—especially to the United States, its largest buyer.

A Sector Woven into India’s Economic Fabric

The textile and apparel industry is not just any other sector in India—it is a vital pillar of the nation’s economic engine. Contributing 2.3% to India’s GDP, and 13% to the total industrial output, this sector also accounts for 12% of the country’s total exports. In terms of employment, it stands tall as the second-largest job creator after agriculture, providing livelihoods to millions across urban and rural India.

The importance of India’s textile exports becomes even clearer when we look at the trade numbers. In FY 2023-24, India exported textile goods worth $34.4 billion. Of this, apparel made up 42%, raw/semi-finished materials 34%, and non-apparel finished goods 30%. Notably, the United States alone accounted for 28% of these exports, translating to a whopping $10 billion.

Trump’s Tariffs: A 26% Blow with a Temporary Reprieve

In this context, Trump’s proposed 26% reciprocal tariffs have sent shockwaves through the Indian textile sector. Although a 90-day pause on the tariffs—announced on April 9—has brought a brief moment of relief, the long-term implications remain hazy. It’s important to note that this temporary break applies to all countries except China, indicating the uncertainty is not over yet.

If these tariffs are implemented after the pause ends, Indian textile and apparel exporters could face serious competitive disadvantages, especially in the US market where price sensitivity is high.

What Lies Ahead: Challenges and Potential Opportunities

The textile industry is bracing for multiple challenges if the tariffs are enforced. Higher tariffs could make Indian goods costlier and less attractive compared to competitors from nations with favorable trade agreements with the US. This could lead to a decline in orders, margin pressures for exporters, and possibly job losses in export-oriented manufacturing hubs.

But within the challenge lies opportunity. If the industry and the government work together, India could explore diversification strategies—looking beyond the US market and boosting exports to regions like the EU, Middle East, and Southeast Asia. Additionally, this situation could push Indian manufacturers to invest in value-added products, improve efficiency, and focus on branding to command better margins.

The future of India’s textile exports now depends on how global trade dynamics evolve and how agile the industry is in adapting to them.

The Need for Policy Support and Clarity

As the sector waits for more clarity on the US tariff decision, there is a strong need for supportive policy interventions from the Indian government. Measures such as export incentives, FTA negotiations, and subsidies for modernisation could soften the blow if tariffs do go into effect.

For now, the pause in tariffs has bought time—but not certainty. The coming months will be crucial in determining whether India’s textile industry can weave its way through this storm or if it will have to unravel parts of its long-established export strategy.