India’s Textile Sector Faces New Challenges Amid US-Vietnam Trade Deal and Global Shifts

India’s textile industry, employing over 45 million people and producing approximately 22 billion garments annually, remains a cornerstone of the nation’s economy. Valued between $175–$225 billion in 2025, the sector contributes 2.3% to GDP and accounts for 10–12% of total exports, with FY24 textile exports reaching $34 billion. Recent developments in global trade are prompting caution among Indian textile exporters. The US-Vietnam trade agreement, announced by the US administration, has introduced new tariff dynamics: US imports from Vietnam will now face a 20% tariff, while US exports to Vietnam will be tariff-free. This shift replaces earlier reciprocal tariffs that were as high as 46% and later reduced to 10%. The new arrangement is expected to reshape sourcing preferences and may heighten competition for Indian exporters, especially as Vietnam is a significant supplier of garments to the US. As global supply chains adjust, Indian textile companies are closely monitoring the potential impact. Firms like Gokaldas Exports, which face total duties up to 28% on US shipments, may be compelled to raise prices, risking reduced demand. KPR Mill, with 21% of its revenue from North America, could also be affected by the new tariff structure. India is in the final stages of its own trade negotiations with the US. Industry observers suggest that a favourable tariff regime for Indian textiles could help offset some of the competitive pressure from Vietnam and support export growth. However, the full implications remain uncertain as details of the US-Vietnam deal, including specific product tariffs, have yet to be disclosed. Despite these headwinds, India’s textile sector continues to benefit from government initiatives, policy support, and rising global demand. The industry’s outlook remains positive, but its ability to adapt to evolving trade dynamics will be critical for sustaining growth and maintaining its position as a global textile leader.