US Tariffs Devastate Indian Textile Exports, Exporters Face Profit Squeeze
Overview
Indian textile exporters face severe blow from 50% US tariffs, enduring over four months of pain. Companies are forced into price cuts and sharing the tariff burden, slashing profitability by up to 15%. The ongoing pressure threatens MSMEs, potentially leading to job losses and factory closures as demand shifts to competitors like Bangladesh and Vietnam.
Stocks Mentioned
Regulatory Headwinds
India's textile industry is grappling with a significant downturn, primarily driven by a persistent 50% tariff imposed by the United States. This trade barrier, in effect for over four months, is severely impacting the entire value chain and especially small and medium-sized enterprises (MSMEs).
The steep tariff has forced Indian exporters into difficult operational adjustments. Companies are compelled to reduce their selling prices, negotiate cost-sharing agreements with buyers, and explore relocating production facilities to countries with more favorable trade terms. However, shifting production is a lengthy process, requiring substantial time for supply chain reconfiguration, machinery adaptation, and re-establishing buyer relationships, often taking six to eight months.
Profitability Under Pressure
US buyers remain hesitant to absorb the full tariff burden without clearer indications of its duration. Consequently, most Indian suppliers are bearing a substantial portion of the cost. Reports indicate manufacturers are absorbing approximately 25% of the tariff, translating directly to a nearly 15% reduction in selling prices. This erosion of margins is proving unsustainable for many businesses.
Shifting Sands of Global Sourcing
For firms like Pearl Global Industries Limited, the impact is mitigated by substantial manufacturing operations outside India in countries such as Bangladesh, Vietnam, Indonesia, and Guatemala. Nevertheless, India-based production for the US market is declining, prompting companies to actively rebalance their order books towards other international geographies.
The SME Squeeze
The domestic fallout, particularly for smaller enterprises, is acutely severe. Industry leaders warn that a significant number of smaller players may be forced to exit the market. This could precipitate widespread job losses and the closure of manufacturing units, especially in key textile hubs like Tirupur, Karur, and the NCR-Panipat region. Even large, listed companies are feeling the strain, with the cotton garment sector, a significant export contributor, being particularly hard-hit.
Export Data Reflects Stress
Official figures highlight the sector's distress. India's textile exports to the US saw a decline of 5-6% in September 2025 compared to the previous year. In stark contrast, competitors have capitalized on the situation; Bangladesh's exports to the US grew by approximately 10%, and Vietnam's saw a rise of about 2.5%, signaling a decisive shift in American sourcing patterns.
Call for Support
While government initiatives such as credit facilities and Production Linked Incentive (PLI) schemes offer some relief, stakeholders emphasize that more comprehensive support is crucial. A key demand includes ensuring raw materials, such as cotton and man-made fibers, are available at internationally competitive prices to help Indian exporters regain their footing and remain viable in the global market.
