The spectre of steep US tariffs hammered has Indian textile stocks over the past month. Until 26 August, shares of Trident Ltd, Arvind Ltd, Welspun Living Ltd, and Indo Count Industries Ltd had shed 10-15%, while smaller peers such as Himatsingka Seide Ltd, Kitex Garments Ltd and Faze Three Ltd suffered even deeper corrections. Those fears crystallized on 27 August, when Washington issued a draft notice to impose 50% tariffs on Indian imports.
For companies with large exposure to the US, the move threatens volumes, margins and, ultimately, earnings downgrades unless a trade deal is reached.
“Retailers were comfortable with 25% tariffs imposed earlier (~5% disadvantage) which could have been absorbed through negotiations, cost optimization programs, and incentives. But we believe exporters will not be able to bear the impact of the additional 25% US tariff,” said an Antique Stock Broking Ltd report on 28 August. So, Antique has cut FY26/FY27 and FY28 earnings estimates for Arvind by 13%/17%/10% respectively and for Welspun by 15% for each year.
The math is stark: higher tariffs could render Indian exports unviable, especially when rivals in China, Bangladesh, Pakistan and Vietnam face lower duties.
That makes diversification more urgent. Arvind, for instance, does around ₹200 crore worth of business in the UK and expects this to double in the coming years under new trade enablers. With the UK FTA, the Welspun management aims to increase its non-US exposure from about 40% currently, while Gokaldas Exports expects contribution from the UK and the European Union to reach 20-25% by FY26-end from the current 13%. Further, its recent acquisition of Atraco also provides a cushion, since Kenyan and Ethiopian units supplying to the US market face only 10% tariffs.
Beyond Europe, West Asia could open fresh lanes of growth. According to Dun & Bradstreet, Indian textile makers can consider targeting hotel chains and luxury real estate projects in Saudi Arabia and the United Arab Emirates (UAE) to anchor long-term demand.
“Saudi Arabia and the UAE offer expanding, high-income markets with rising hospitality and tourism sectors driving demand for premium bed linens, home textiles, and ethnic wear. India’s competitive edge in quality cotton and blended fabrics, coupled with existing trade goodwill, allows for a premium positioning,” it said in a recent report. While diversification seems to be an apt strategy in the current backdrop, it will take time to yield results.
Back home, the government has offered short-term relief.
On 18 August, the Ministry of Finance’s Department of Revenue notified duty-free cotton imports by scrapping customs duty and the Agriculture Infrastructure and Development Cess. This exemption is valid from 19 August- 30 September. At a time when the Indian textile sector is facing high cotton costs and additional pressure from US tariffs, with this move duty-free imports would allow access to cheaper international cotton.
The import duty relief is a short-term positive for all in the textile value chain, with a major edge for spinners and fabric manufacturers, said Elara Securities (India) in a report dated 19 August.
“With about 42 days of import duty relief, it may be optimized by the companies that have already placed orders to import cotton as it requires about 30-45 days shipping time,” it said. While this relief may temporarily improve margins of Indian exporters for one-two quarters, it is unlikely to materially change the long-term cost competitiveness of Indian companies, cautioned Elara.
