Indian textile stocks have plunged sharply on Dalal Street in the last few sessions after imports from the country were slapped with the highest 50% tariffs, raising concerns that global retail giants may shift their sourcing to other Asian countries to avoid higher duties.
On Wednesday, US President Donald Trump signed an executive order imposing an additional 25% tariff on Indian goods, citing India’s continued imports of Russian oil as the rationale. This hike comes on top of the 25% tariff announced last week, bringing the total US duty on many Indian imports to 50%, the highest among major nations, with only Brazil ahead.
Worryingly, the tariff imposed on India is also higher than that on other Asian countries such as Vietnam (20%), Indonesia (19%), and Japan (15%), which experts believe could weaken India’s position as a preferred sourcing destination, particularly in textiles, which in recent years have accounted for a significant share of the country’s exports, reaching to 8% share.
While China, which had the largest export share among Asian nations, received a 90-day tariff extension, its share in global textile and apparel exports, however, has dropped sharply in recent years due to rising labour costs and the global shift under the China+1 strategy. India has capitalised on this trend, attracting global buyers as the government rolled out various policy initiatives.
India is now among the top textile-exporting countries globally, with a share of approximately 4% of global textiles and apparel exports. The major export destinations for India in this segment are the United States (US), the European Union (EU), and the United Kingdom (UK), accounting for around 53% of total textile and apparel exports in FY 2023–24.
The unexpected tariff blow from the US comes at a time when India is signing free trade agreements with major nations. In early May, India and the United Kingdom officially signed an FTA after years of negotiations, enhancing the competitiveness of the Indian textile industry in the UK market, where competing countries like Pakistan, Bangladesh, and Sri Lanka currently enjoy duty-free access under the UK’s Generalised Scheme of Preferences (GSP).
The landmark deal is expected to double textile and apparel exports to the UK over the next two years. However, India’s textile and apparel export share to the US is four times higher than its share to the UK, making the American market far more critical for the sector’s growth prospects.
US remains largest market for India’s textile and apparel exports
In 2024, India accounted for around 6% of the United States’ total apparel imports, translating to exports worth approximately $4.8 billion out of the US’s $80 billion import bill, contributing to 33% of India’s overall apparel exports, as per the recent available data.
In the United Kingdom, India held a 5% share, equivalent to around $1.13 billion in exports, based on the UK’s total apparel imports of $22.5 billion during the year, representing 8% of India’s total apparel exports, which indicates that the US market is more than four times larger in value for Indian apparel compared to the UK.
During 2024, the US imported apparel worth $80 billion, with China accounting for 21% of the total, followed by Vietnam (19%), Bangladesh (9%), India (6%), and Sri Lanka (3%). During the same period, the UK imported apparel worth $22.5 billion, with China also holding the highest 25% share, though it came down from 30% in 2019.
India’s textile and apparel exports in FY25 grew by 6.32% to $36.606 billion. Of this, apparel exports rose by 10.03% to $15.989 billion, while textile exports increased by 3.61% to $20.617 billion.
Moody’s warns Trump tariffs could hit India’s growth and manufacturing push
Global credit rating agency Moody’s Ratings on Friday said that Trump’s proposed tariffs on Indian exports could severely undermine India’s manufacturing ambitions and slow economic growth.
The agency noted that the tariffs could slow India’s real GDP growth by around 0.3 percentage points from its current forecast of 6.3% for the fiscal year ending March 2026.
“Beyond 2025, the much wider tariff gap compared with other Asia-Pacific countries would severely curtail India’s ambitions to develop its manufacturing sector, particularly in higher value-added segments such as electronics, and may even reverse some of the gains made in recent years in attracting related investments,” the ratings agency said.
A larger import bill would widen the current account deficit, especially amid weaker tariff competitiveness that could deter investment inflows. The agency further noted that the magnitude of the drag on growth from tariff barriers will influence the government’s decision on a fiscal policy response, although it expects the government to maintain its focus on gradual fiscal and debt consolidation.
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