India apparel exporters look to diversify to UK, EU to soften Trump tariff blow
The latest punitive move of the US—doubling duties on Indian goods, including garments to 50%—has upended cost structures in a price-sensitive sector that competes with Bangladesh and Vietnam that have lower tariffs than India.
Companies are now diversifying buyers, shifting production to lower tariff hubs in Africa, Latin America, and Southeast Asia, and building orders in FTA-linked markets. For Raymond, Gokaldas and Pearl Global, that means everything from relocating lines to Ethiopia or Guatemala to intensifying sales efforts in the UK, where a new trade pact promises duty parity with Bangladesh and a 12% edge over China. With Europe already expanding in their export mix, the industry is moving quickly to contain short-term losses in the US while positioning for long-term growth in markets with lower trade barriers.
India is the sixth-largest exporter of textiles and apparel globally, with the sector's exports valued at $34.4 billion in FY24, government data shows. Europe and the US consumed nearly 66% of India's apparel exports, 58% of finished non-apparel goods, and 12% of raw materials-semi-finished materials.
The new tariff regime, announced by US President Donald Trump, imposes a 25% penalty tariff on goods from India over and above the 25% duty that kicked in earlier this week.
In 2017, the Raymond Group had moved part of its manufacturing base to Ethiopia, which attracts a 10% tariff in the US. India, however, remains the primary production hub for the company's US exports, and the new tariffs will significantly increase costs.
For example, readymade garments such as shirts and trousers, which earlier faced an 11% tariff, are now subject to 36%, with a potential total of over 60% with the additional duty.
Raymond is now stepping up efforts to secure larger orders from the UK, a move that is expected to be lucrative once the India-UK FTA takes effect.
'We can push some of our customers to the Ethiopian market. Additionally, we have always had a diversified portfolio. The US is attractive because of the large quantum of orders which enables us to get more productivity. However, February-March onwards, we have pushed our teams to camp constantly in Europe to build more orders. With the recent FTA with UK, the market is going to be more attractive. Over the next three to four years, our UK business can easily double," Amit Agarwal, group chief financial officer of Raymond Ltd, told Mint.
Agarwal said there remains a possibility of relocating more production lines from India to Ethiopia if the tariff issue persists. "We can take out some of the lines from India and put it in Ethiopia, if the need be. We don't want to take any knee-jerk reaction. At the back of the mind, the alternate exists if the issue continues to prolong. In the short-term, US volumes could see a temporary dip if the issue does not resolve over the coming week," he said
Earlier this week, Sivaramakrishnan Ganapathi, vice chairman and managing director of Gokaldas Exports, said sourcing diversification was a key theme for all customers, and that India remained a top contender among its Asian peers.
Gokaldas Exports, which exports and manufactures apparel to over 50 markets, including the US and Europe, saw North America contribute 80% of its business in FY24. In the same year, the share from Europe nearly doubled to 6.1%.
The recently-announced India-UK FTA offers a 12% duty advantage over China, putting India at par with Bangladesh. This creates strong export potential and an opportunity for exporters to diversify. India is also in negotiations for an FTA with the EU, which has the potential to further expand the industry, the company said.
"In anticipation, we are stepping up our European business. Our share in Q1 FY26 has increased to over 13% from a 9% average in FY25. We are actively engaging with customers in the EU and UK to diversify," Ganapathi said during the company's post earnings call on 6 August.
Over the last few years, Gokaldas Exports has tried to de-risk its business model by expanding its product range and building manufacturing facilities across continents, in India as well as Africa. 'We have also started to diversify the markets where we sell, and the FTA with UK will be a big help. As this unprecedented tariff scenario with the US unfolds, we will explore all diversification options, including working with our existing customers, on how we can hold price points for the end consumer through innovation," he said in a statement to Mint.
Pearl Global Industries Ltd (PGIL), a listed garment exporter with manufacturing hubs in India, Bangladesh, Vietnam and Guatemala, has been working to reduce its reliance on the US market. While over 60% of its business came from the US in FY24, that figure is down to just over 50% at present due to growth in other markets. Its clients include Kohl's, Old Navy, Primark, among others.
With the sharp hike in US tariffs, PGIL is now shifting US-bound production to tariff-friendly hubs like Guatemala, Vietnam, Indonesia and Bangladesh, its managing director Pallab Banerjee said in a statement to Mint.
'With the 50% tariff imposed on India, Pearl Global is recalibrating its business strategy to adapt to these evolving trade dynamics. While production for the US market will be reassigned to more favourable hubs, India will continue to grow by tapping into new and advantageous partnerships—like the UK FTA, and will focus on other existing FTA markets of Japan and Australia until the US tariff issue is resolved."
Banerjee said the increased tariff has already triggered an immediate order shift, with buyers relocating production to alternative hubs where PGIL has operational capacity and a net 10% baseline tariff.
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