The 50% US retaliatory tariff has delivered its full blow to India’s textile sector, with October 2025 exports seeing a devastating 12.91% year-on-year contraction in overall textile and apparel shipments, as per CITI data. Cotton yarn and fabric exports alone plummeted by 13.31%. This has triggered an acute liquidity crisis in North Indian hubs, forcing a radical shift in the industry's focus.

Europe emerges as the new anchor

Instead of merely battling the tariff-induced payment crises in hubs like Delhi and Ludhiana, the industry is now aggressively pivoting its export strategy towards the European Union (EU). With the EU market nearly twice the size of the US for textiles, and an India-EU Free Trade Agreement expected to be finalized by the end of 2025, exporters view this as a necessary, long-term structural change. As one industry leader stated, "The EU cannot replace US volumes immediately, but it is the future for tariff-free growth."

Relief package and diversification drive

In a bid to cushion the immediate impact, the Indian government has announced relief measures, including a four-month moratorium on loan repayments for the readymade garment segment and an extension of the export realization period. Textile conglomerate Arvind Limited, which has about 21% of its topline exposed to the US market, estimated a quarterly EBITDA impact of ₹25-30 crore from the tariffs, partially offset by increased volumes in other markets.

Simultaneously, the Production Linked Incentive (PLI) scheme is encouraging a shift to Technical Textiles, which are less tariff-impacted. The dual strategy; lobbying for a swift India-US trade deal while actively diversifying into technical textiles and the EU, underlines the industry’s drive to transform a short-term crisis into a mandate for long-term global competitiveness and market expansion.