US Tariff Hike; Catalyst for India's Textile Industry to Go Global
Ms Nishta Rai, Post Graduate Academic Scholar, Fashion Management Studies, National Institute of Fashion Technology, Govt. of India, Daman Campus
The move of the Trump administration to impose reciprocal tariffs on Indian goods will be known on 2nd April 2025. This is in retaliation of tariff India imposed on American goods. Trump administration considers it as a Fair and reciprocal plan to take up the high tariffs India levies on US goods. If US stick on to tariff hike even a 10%, India could lose $6 billion in exports, which could escalate to $31 billion if the tariff rises to 25%. This would be equivalent to 0.16% of India's GDP.
The Indian textile industry is going to face a significant risk with the US imposing a 6.59% tariff hike on Indian textile exports, valued at $2.76 billion. This increase will make Indian textiles more expensive compared to duty-free imports from Bangladesh. We currently impose a 10.4% tariff on US textile imports, while the US imposes a 9% tariff on Indian textile imports. The new tariff hike will further widen this gap, making it more difficult for Indian textile exporters to compete in the US market. The impact of this tariff hike can be felt across various segments of the Indian textile industry, including textile products, such as fabrics, yarns, and fibres, which will face an average duty of 3.55% in the US. This could lead to a decline in Indian textile exports to the US, which could have a ripple effect on the entire industry.
The Indian policy makers are taking steps to mitigate the impact of this tariff hike. We have sought tariff exemptions for textiles in its free trade agreement (FTA) talks with the European Union. Moreover, the government is considering increasing the textile ministry's budget allocation for 2025-26 by 10-15% to support the industry.
It is a fact that the tariff is going to throw significant challenges, however, it gives opportunities as well. Rather than relying on US market alone, the export market diversification to Europe and Latin American countries can reduce dependency on the US. It is important to fill gaps left by China to capture market share in sectors of textile machinery by offering competitive pricing and quality products. We can focus on high-value products like premium cotton fabrics and technical textiles to command better margins globally.
To maintain the good vibe created by Prime Minister Narendra Modi, bureaucratic negotiation for tariff relief should be continued with US officials to secure exemptions or reduced tariffs for critical sectors of Textiles and allied business. Lowering of tariff should be never be considered as a deadlock, India can consider lowering tariffs on politically significant US exports without harming domestic industries. Meanwhile efforts should be accelerated to strengthen domestic industries to encourage investments in manufacturing through production-linked incentives to reduce dependency on imports and boost competitiveness.
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