US Tariff Hike Threatens India’s $10B Textile Exports

CareEdge Ratings has released its latest report titled “USA Tariff Hike to 50% Threatens India’s $10+ billion Textile Export”, highlighting the significant challenges facing India’s textile and apparel industry.

The Indian textile and apparel industry, valued at USD 160–170 billion, exported USD 35 billion worth of goods in CY24, with ready-made garments (RMG) and home textiles contributing nearly 63%. The USA remains India’s largest export market, accounting for 28–29% of total exports, or around USD 10.5 billion.

Following the recent U.S. tariff hike from 25% to 50% on Indian goods, Indian textile exporters now face a steep cost disadvantage compared to competing nations such as Vietnam, Bangladesh, Pakistan, and China. With effective tariff rates on Indian textile products now ranging between 52–64%, exporters risk losing market share as buyers may shift orders to countries with lower tariff burdens.

While overall textile and apparel exports may only decline marginally in CY25, a significant reduction is expected in CY26, with exports potentially falling 9–10% to around USD 30 billion. CareEdge warns that RMG and home textile exporters’ margins (PBILDT) could contract by 300–500 basis points, depending on how much of the tariff burden can be absorbed or negotiated with U.S. buyers.

Despite the setback, mitigating factors could soften the blow. India’s strong presence in cotton-based textiles, its role as the second-largest home textile supplier to the USA, potential gains in the EU, UK, and Middle East markets through Free Trade Agreements (FTAs), and a likely rise in cotton yarn and fabric exports—where competitors lack backward integration—could provide relief.

Commenting on the situation, Akshay Morbiya, Assistant Director at CareEdge Ratings, stated:

“India’s textile export is expected to decline by 9–10% in CY26. With expected loss of revenue and partial tariff absorption, PBILDT margin of Indian RMG and home-textile exporters is expected to decline by 300–500 bps. However, the degree of decline will ultimately hinge on how effectively Indian exporters can negotiate pricing with their US customers to retain volumes.”

Adding to this, Krunal Modi, Director at CareEdge Ratings, emphasized government support:

“The Government of India has removed 10% import duty on cotton till December 31, 2025. Additionally, expected support from the Government in the form of expanding export markets through its dedicated outreach programme to 40 nations, as well as export incentives and interest subsidies, can support the competitiveness and profitability of Indian textile exporters.”

The report concludes that while the U.S. tariff hike is a severe challenge, India’s proactive trade agreements and global market diversification strategies could help safeguard the long-term resilience of its textile and apparel industry