In a dramatic reversal of fortune, India's apparel industry, once poised for growth amid a changing global trade landscape, now finds itself in a state of turmoil. Donald Trump’s recent imposition of a 50% US tariff on Indian garment imports has sent shockwaves through the sector, forcing exporters to a difficult crossroads. This steep levy, a sharp increase from initial, more favorable proposals, has soured the relationship between New Delhi and Washington, leaving Indian exporters grappling with a sudden and crippling disadvantage.

The consequences have been immediate and severe. U.S. clients, including major brands like Gap and Kohl's, are demanding that suppliers either absorb the tariff impact or, in a more drastic move, shift production out of India. Companies like Pearl Global, a key supplier to these brands, have been inundated with "midnight panic calls" and ultimatums from their American partners. To appease these clients, Pearl Global's Managing Director, Pallab Banerjee, has offered to relocate production to the company's 17 factories in Bangladesh, Indonesia, Vietnam, and Guatemala. As Banerjee noted to Reuters, "All the customers are already calling me. They want us to... shift from India to the other countries."

Says Sudhir Sekhri, Chairman AEPC, "This is a huge setback to the labour-intensive apparel export industry. There is no way the industry can absorb this. I am sure the government also realizes that this unreasonable increase in tariff will sound the death knell for the Micro and Medium apparel industry, especially those who majorly sell to the US market, unless the Government of India steps in with direct fiscal support to the industry." 

Sekhri adds, “The USA is a key market for Indian RMG exports, with the country holding a share of 33% in India’s total garment exports in 2024. India’s presence in the U.S. garment import market has grown, with its share increasing from 4.5% in 2020 to 5.8% in 2024 and ranks 4th among the top RMG exporters to the United States.”

This tariff hike has a domino effect across the supply chain, impacting everything from new orders to existing inventory. The Confederation of Indian Textile Industry (CITI) has raised an alarm over the "effective 50% US tariff rate," describing it as a "huge setback." CITI Chairman Rakesh Mehra emphasized that this move "will significantly weaken our ability to compete effectively vis-a-vis many other countries for a larger share of the US market."

The Economic fallout and disadvantage

The new tariff regime has created a significant commercial unviability for Indian exports. The combined regular and new duties now exceed 60%, rendering Indian products uncompetitive against rivals. This is a stark contrast to the tariff rates for other major garment exporters, as illustrated in the table below:

According to Santosh Katariya, President,CMAI, the tariff hike will make Indian apparel "costlier by 30–35% compared to alternatives from countries like Bangladesh and Vietnam." This pricing gap is too substantial for buyers to absorb, which could lead to a sharp decline in export orders. The move has been termed "unjustified, unfair, and arbitrary" by the CMAI, which anticipates "extremely challenging" months ahead.

The inventory crisis and call for government action

A major concern is the existing stock in the pipeline. With average monthly garment and textile exports to the U.S. at an estimated $800 million, industry leaders like Sanjay K Jain, chairman of the ICC National Textiles Committee, fear that stocks worth nearly $2–2.5 billion are now in jeopardy. Exporters are holding back shipments, creating a standstill as buyers and sellers navigate the uncertainty.

Industry leaders are pleading for urgent government intervention. CITI is calling for the fast-tracking of measures to mitigate the hardship, while Jain argues that the government should use savings from "cheaper Russian crude oil" to provide "immediate cash incentives" to the industry, similar to how China responded to its own trade challenges. He also suggested that a Bilateral Trade Agreement (BTA) with the U.S. could be a "win-win proposition" for both nations.

Rahul Mehta, Chief Mentor of CMAI, stated, “While we continue to hope that this development is part of a broader negotiation strategy, we strongly recommend that both the government and the industry collaborate urgently to devise measures that can mitigate the adverse impact of this draconian levy.” CMAI anticipates that the coming months will be extremely challenging for the Indian apparel export sector and is calling for strategic intervention to safeguard the industry's long-term viability.

Finding opportunity in turmoil

While the immediate impact of the new tariff regime is causing significant disruption and threatening the livelihoods of millions employed in the sector, the crisis is also being viewed as a crucial catalyst for change. The sudden and severe trade barrier serves as a "wake-up call" for the industry to reduce its reliance on a single major market.

This difficult situation presents a strategic opportunity for long-term structural reform and market diversification. By leveraging existing Free Trade Agreements (FTAs) with countries like Japan, the UAE, the UK, and Australia, the industry can proactively expand its global footprint. Strengthening a presence in these alternative markets is a viable strategy to mitigate risk and unlock new growth avenues. The challenge, therefore, is to build resilience by strategically broadening market exposure and reducing the vulnerability that comes with over-dependence on any one trading partner.

While the Indian government and industry are confident that they can turn this turmoil into a strategic advantage, the immediate future remains precarious. The current 21-day window for dialogue and diplomacy is a glimmer of hope that a resolution can be found. However, if the tariffs become a long-term reality, it will undoubtedly test the resilience and ingenuity of India's textile and apparel sector.