Dr Siddhartha Rajagopal:  Revised US tariffs could theoretically divert Chinese exports to India

The Cotton Textiles Export Promotion Council is the first Council set up after Independence by the Government of India in 1954 is an autonomous, nonprofit body dedicated to promotion of exports. The Cotton Textiles Export Promotion Council, popularly known as TEXPROCIL has been the international face of cotton textiles from India facilitating exports worldwide.  Texprocil has a membership of around 2,000 companies spread across major textile clusters in India.  Its members are well established manufacturers and exporters of cotton textile products like Cotton, Yarns, Fabrics and Home Textiles, showcasing a dazzling array of products across the value chain. Dr Siddhartha Rajagopal, Executive Director, TEXPROCIL, explains how this revised tariff rate will impact the Indian textile industry.

What impact do you anticipate the revised tariff rates will have on the Indian textile industry as a whole and on the cotton textile sector specifically?
As on 9th April 2025, the US administration has introduced a 90-day pause on reciprocal tariffs allowing trading partners including India to continue exporting into the US subject to an additional ad valorem rate of duty of 10 per cent, until July 9, 2025.

However, it is likely that the continuation of imposition of revised tariff rates may lead to a mixed impact on the industry. Overall, for the Indian textile industry, higher import tariffs on certain raw materials or finished goods could increase input costs, especially for MSMEs relying on imported components. The tariffs, if aimed at protecting domestic manufacturing and enhancing its competitiveness, may otherwise lead to a positive push toward local sourcing and production.

While the US doesn’t import much raw cotton, it imports huge volumes of cotton-based end products like garments and home textiles.

For the cotton textile sector specifically, the impact depends on the product categories affected. It could likely squeeze margins if the inputs which the sector depends on become more expensive. If the tariffs reduce external competition, the sector could benefit from a more favourable domestic market.

Do you foresee a rise in Chinese textile imports into India as a result of the revised tariffs?
A lot would depend on the specific tariff structure. If tariffs on raw materials are lowered while duties on finished goods remain high, it may actually reduce Chinese imports. However, if the tariff revisions inadvertently make certain Chinese goods cheaper or more accessible, we might see a short-term spike in imports—especially in categories where Indian production is limited or less cost-effective, especially in synthetic fabrics.

India has intensified scrutiny of misdeclared Chinese fabric imports. While revised US tariffs could theoretically divert Chinese exports to India, stricter enforcement of ‘Rules of Origin’ and industry vigilance are likely to limit this trend.

Which textile and apparel product categories do you believe are most vulnerable to the effects of these tariff changes?
Experts suggest that product categories like synthetic fibres, technical textiles, and high-value fashion garments could be the most vulnerable. India still imports a significant portion of specialty fabrics and high-performance materials, so any tariff hikes on these inputs could affect production costs and competitiveness. Additionally, low-margin segments like basic knitwear or cotton garments may also suffer if tariffs disrupt the supply chain or increase prices.

Some of the other most vulnerable product categories may include:

• Apparel: Accounts for 35 per cent of India’s US-bound exports, facing a 26 per cent tariff.
• Carpets: 58 per cent of India’s carpet exports rely on the US market.
• Synthetic fabrics: Vulnerable to under-invoicing and misdeclaration by importers.

Would you view this tariff revision as a strategic opportunity or a significant challenge for the industry?
Tariff revision is both a strategic opportunity and a significant challenge for the industry. Strategically, it’s an opportunity to strengthen domestic capabilities and encourage value addition within India. But in the short term, it could be a challenge—particularly for companies heavily reliant on imported materials or facing cost-sensitive international buyers. The key will be how swiftly the industry adapts and how supportive the government is in fostering local alternatives.

In the case of demand dynamics, there can be likely potential long-term gains if the US sourcing shifts to India. However, for the US buyers, Central America continues to be a competitive alternative for near-shoring their sourcing requirements. Also, one can expect short-term demand contraction from the US. market due to higher consumer prices.

In the context of policy negotiations, the proposed BTA between India and the US presents an opportunity for the textile industry to improve market access. However, due to the evolving circumstances, greater clarity on tariff details and the likely terms of negotiation is expected only after July 9, 2025.

In light of the higher tariffs, how do you assess India’s competitiveness in the US market compared to countries like Bangladesh, Vietnam, and China?
Unlike other Asian countries, China is the most affected in this tariff regime. China now faces tariffs of 245 per cent on import of goods into the United States, which is likely to weaken its dominant 30 per cent US market share. Despite being an opportunity for India, to grab a share of China’s exports into the US, we will need to add capacities quickly.

On account of higher tariffs, the resulting higher input costs could erode India’s price competitiveness if not managed carefully. Bangladesh and Vietnam already enjoy preferential trade access and lower labour costs, making them formidable competitors. China, while facing its own tariff challenges, continues to benefit from scale and efficiency. India needs to offset these disadvantages by focusing on quality, lead times, sustainability, and innovation to remain relevant in the US market.

Are these new tariff structures likely to influence your export strategy, such as diversifying product offerings or exploring new international markets?
While the tariffs position India favourably against Asian rivals, success of the country’s export strategy will depend on balancing cost competitiveness, policy agility, and demand-side risks.

The strategy may require some key adaptations going forward, like:

• Product diversification: Focus on value-added textiles and premium segments to offset price sensitivity.
• Market expansion: Explore the EU and ASEAN markets to reduce the U.S. dependency.
• Supply chain efficiency: Adopt automation and sustainable practices to lower costs. 
• Policy advocacy: Push for bilateral agreements (e.g., zero-tariff cotton imports) to solidify advantages.

To avoid any potential impact on our exports, we are already evaluating the export mix and considering moving into value-added segments where India can offer differentiation. Exploring new geographies—like Africa, Latin America, and the Middle East—could also help mitigate dependence on price-sensitive markets. Additionally, we’re looking at vertical integration and local sourcing to reduce exposure to global supply chain disruptions and tariff volatility.