By Paresh Parekh

The United States has imposed significant tariffs on textile imports from various countries, aiming to protect domestic industries and address trade imbalances. Under the Trump administration, around 27% reciprocal tariff was levied on Indian textile imports. This move is part of a broader strategy where tariffs on competitors like Vietnam (46%), Bangladesh (37%), Cambodia (49%), Pakistan (29%), and China (34%) seem even higher. These tariffs have reshaped the global textile trade landscape, possibly positioning India more favourably compared to its competitors.

Bearing on Indian Exports: The imposition of US tariffs presents both opportunities and challenges for the Indian textile industry. On the positive side, higher tariffs on competing nations provide India with a competitive edge, potentially increasing its market share in the US. In 2023-24, out of approx. $36 billion of textiles exports, the US accounted for nearly 28%, amounting to approximately $10 billion. This favourable position could lead to increased export volumes and revenue for Indian manufacturers.

Impact on US Consumption: However, the tariffs also have implications for US consumers. Higher import costs may lead to increased retail prices for textiles and apparel, potentially reducing overall consumption. This price sensitivity could result in a contraction of the US market, affecting demand for Indian exports. Conversely, some US consumers may shift towards more affordable alternatives, benefiting Indian exporters if they can maintain competitive pricing.

Rising US Exports: The US textile and apparel industry has seen a significant increase in exports, driven by rising global consumer demand for downstream textile products such as technical textiles and home textiles. In 2021, US exports of textile and apparel products increased by $3.4 billion (18.3%) to $22.3 billion. This growth was particularly notable in exports of fibers and yarns, which saw a 23.8% increase. The trend indicates a robust demand for US textile products, which could influence the dynamics of global trade and impact Indian exports.

Forecasts suggest that the Indian textile sector will continue to expand, leveraging its competitive advantage in the US market. The industry's ability to innovate and adapt to changing consumer preferences will be crucial in maintaining its growth trajectory. However, short-term slowdowns in the US market due to tariff-induced price increases are anticipated.

Existing Issues in the Industry Despite the opportunities presented by US tariffs, the Indian textile industry already faces several challenges. These include:

• Environmental Concerns: The industry is a significant contributor to pollution, with high volumes of waste and chemical hazards.
• Raw Material Shortages: Dependence on imported raw materials and rising costs pose significant risks.
• Infrastructure Bottlenecks: Inadequate infrastructure and logistical challenges hinder efficient production and export.
• Labor Shortages: The industry struggles with labor shortages, exacerbated by the pandemic.

Addressing these issues is critical for the long-term sustainability and competitiveness of the Indian textile sector.

In conclusion, the imposition of US tariffs on textile imports presents a mixed bag for the Indian textile industry. While it offers a competitive advantage over other exporting nations, it also poses challenges related to market contraction and increased costs. The industry's future growth will depend on its ability to innovate, adopt sustainable practices, and overcome existing challenges. By strategically navigating these complexities, the Indian textile sector can continue to thrive in the global market.

(Paresh Parekh is National Retail & Consumer sector Leader, Tax, EY India. Terjani Samant, Senior Manager, Tax, EY India also contributed to the article. The opinion expressed here are personal views of the writers and do not in any manner represent views of organization they work for)