India is planning to shift sourcing of certain products from other countries to the US to reduce its trade surplus as both nations continue negotiations on a trade deal. As a first step, New Delhi may cut apple imports from Turkey and New Zealand, and high-end fibre from China, instead sourcing them from the US, say officials said. This move will have an impact on various sectors

Impact on the textile & apparel industry

Synthetic fiber sourcing: India imports significant quantities of high-tenacity and specialty synthetic fibers (like certain polyesters, nylons, and aramids) from China, Taiwan, and Germany. These are crucial for technical textiles, high-performance apparel, and industrial applications. Sourcing these from the US could diversify India's supply chain and reduce dependence on a single region. However, it raises questions about cost competitiveness and the availability of specific fiber types as US-produced synthetic fibers may be more expensive than that from China or Taiwan, impacting the cost of finished goods. Also ensuring the US can supply the exact types and quality of fibers needed is crucial. Logistics and lead times is another issue as establishing reliable supply chains from the US needs careful planning.

As per various trade data, China is a dominant player in supplying synthetic fibers to the world. Supply of specific high end fibres is very important. For example, Aramid fibers are important for defence and high end applications and there is a price difference between the fibre from China and the US.

Cotton sourcing: India imports cotton from various countries, including Egypt (long-staple cotton), Australia (high-quality cotton), and others. Fluctuations in global cotton prices significantly impact the Indian textile industry. The US is a major cotton producer. Shifting some cotton sourcing could strengthen trade ties and potentially provide a stable supply. However, matching the specific quality and staple length of cotton from Egypt or Australia with US cotton is essential. For example, Egyptian cotton is known for its long staple length and high quality, it's used in luxury textiles. Replacing this with US cotton requires careful assessment of fiber properties. Similarly, Australian cotton is also known for its good quality and sustainable farming practices.

Meanwhile global cotton prices are subject to volatility, and sourcing from the US won't eliminate this risk. And disrupting existing cotton trade relationships could have repercussions for India.

Impact on finished goods

Increased costs of raw materials like fibers and cotton could lead to higher prices for finished textile and apparel products. This could impact the competitiveness of Indian exports in the global market. However, if the US can provide high-quality materials, it could enhance the value and premium positioning of Indian textile products.

However cost competitiveness is a primary concern for US-sourced materials compared to existing suppliers. And shifting sourcing could disrupt existing supply chains and require significant adjustments. Trade relations too could get impacted and balancing trade relations with the US while maintaining relationships with other trading partners is crucial.

However, the threat of reciprocal tariffs adds uncertainty and could impact trade flows. At the same time, efficient logistics and infrastructure are essential for smooth trade between India and the US.

Potential benefits

One major benefit of increasing sourcing from the US it will help in diversification of supply chains and reducing reliance on single-source suppliers. It would also strengthen US-India trade relations and foster closer economic cooperation. What’s more, it could lead to collaborations in textile technology and innovation. And better trade relations with the US could lead to better market access for Indian finished goods.

However detailed cost-benefit analysis of sourcing materials from the US compared to existing suppliers needs to be done going ahead. Establishing robust quality assurance mechanisms to ensure US-sourced materials meet the required standards is also important.

Indian manufacturers need to forge strategic partnerships with US textile companies to facilitate technology transfer and supply chain integration. The Indian government too needs to provide support to the textile industry to navigate these changes.