Jobs at risk, irreversible market loss if US tariffs continue: Textile exporters in missive to Vice President

“With the threat of additional or prolonged tariffs, US buyers are withholding or cancelling new orders as buyers are unwilling to risk mid-cycle tariff escalation. Even with 25 per cent discounts, further tariff absorption is commercially impossible and passing costs to buyers is not viable,” the exporters said.

“The textile industry has already absorbed significant losses in national interest to protect exports and employment. There is no further shock-absorption capacity. Delay of even 3-6 months risks permanent damage to a strategic export sector,” the letter read.

Seeking immediate support from the government, the apparel exporters said that market diversification is not a short-term option as textile sourcing is embedded in long-term buyer supply chains and developing alternate markets requires “2-3 years for buyer onboarding, compliance audits, and volume scaling”.

“Abrupt loss of the US market will lead to permanent customer displacement and allow competitor nations with preferential access to replace India,” AEPC said, while seeking interim protective measures for textile exports pending treaty conclusion.

The Indian Express had reported in December that negotiations between Indian apparel manufacturers and US importers had stalled for summer orders, worth around $2 billion, due to uncertainty around the trade deal. And orders have begun moving to competitors, such as Bangladesh, Vietnam and even China, which face lower tariffs compared to the highest tariffs of 50 per cent imposed on India.

The stalled negotiations between Indian exporters and the US importers assume significance as India exported $10.3 billion of textiles and apparel (T&A) to the US in 2024. The share of T&A in India’s world exports was 8.21 per cent in 2023-24. The supply chain of apparel and textiles is largely domestic, as about 90 per cent of the inputs are sourced domestically, indicating the labour-intensive nature of the sectors.

However, the government has taken steps to aid the sector by easing duty on key raw materials like cotton, revoking several quality control orders impacting the textile supply chain and addressing the MSMEs’ access to input material.

An Indian Institute of Foreign Trade (IIFT) research report authored by Professor Sunitha Raju said that a 50 per cent tariff on India will result in $6.6 billion or a 67.8 per cent fall in US import demand for Indian T&A. “This negative effect is highest for fibre (-95.8 per cent), followed by yarn (-87.5 per cent) and fabrics (-82.9 per cent). However, in absolute values, made-ups and apparel account for US$5.7 billion or an 85 per cent fall in the T&A exports to the US,” the report said.

India’s tariff being higher relative to the competitors, China, Vietnam and Bangladesh will have significant market share gains for apparel and Pakistan, Mexico and China for made-ups. Thus, these tariff differentials are adversely influencing the competitive landscape in the US market, it said.

With a 25 per cent tariff, the negative demand effect is about $2.1 billion, translating into a 21.6 per cent fall in imports across product groups. In absolute terms, the fall in import demand is highest for made-ups ($921 million), followed by apparel ($788 million), as these two product groups account for an 81 per cent fall in the import demand, the report pointed out.

According to the report, even though small firms co-exist with large firms in the textile industry, textile exports are dominated by large firms. However, the impact of the US tariff shock affects all producers in the textile industry and is transmitted through many domestic suppliers, with nearly 70 per cent of sectoral value derived from intermediate inputs first-order indirect effects are substantial, totalling $ 4.6 billion, including $ 1.4 billion within the textile sector.