India-USA Textiles Trade: What’s Next?
August 29, 2025 The secondary tariff on India kicked off on August 27, 2025. As of today, the import tariff to the United States for manufactured goods except pharmaceuticals is 50%.
The United States is using tariffs to realign economic and geopolitical situations. The U.S. ranks as the number one export destination for goods from India, averaging about 20% of its global total exports.
Textiles and apparels are front and center of the sensitive tariff issue as this sector is second in export value (following mobile phones) from India to the U.S. The sector that comes closest to textiles in export value is gems and jewelry. On an average, India exports about $9-10 billion worth of textiles and apparels, and hence this sector offers large employment at both organized and unorganized levels in India.
Loss of jobs in India due to reduced exports has created genuine panic in the industry, needing immediate solution. Trade associations and stakeholders have rightly represented the situation to the Indian government and to state governments where textile manufacturing is a key economic player. While such representations are the need of the hour, social media channels are having field days on the tariff issue by blaming and name calling, which will not be helpful. However, factual representation of the situation, the tariff’s impact on employment, and its negative effect on India’s growth will be helpful for reasoning by the Indian Government to the other side.
The Indian government under the leadership of Honorable Prime Minister Narendra Modi has produced a four-point scheme to manage the situation while negotiations are going on.
What’s the Way Forward?
I am of the opinion that a call between the leaders of the world’s largest democracy and the world’s largest economy will happen soon. This will lead to a win-win situation catering to the Nation First agenda of both governments.
In my view, the 25% additional tax on the petrol purchase by India from Russia cannot be sustained for long as this is used as a negotiating tool by the United States’ administration to bring Russia to the table to resolve the situation with Ukraine. Probably both governments will be flexible at the end to resolve this sticking matter without comprising national pride and security.
These three paths can bring win-win solutions in reasonable timeframe: 1) Diplomacy; 2) Negotiation, and 3) Engagement.
In terms of diplomacy, Honorable Prime Minister Modi has shown a high level of leadership by involving in quiet diplomacy and timely engagement with powerful nations like Japan and China.
As the saying goes, timing is everything. Prime Minister Modi’s diplomatic trips to China and Japan and the arrival of the new ambassador from the United States to India will provide momentum and new direction of engagement between both nations. The Indian government might be already planning to engage in a productive way representing India’s interests and reasoning in a positive way with the Honorable Sergio Gor, President Trump’s nominee for the ambassadorship. Having someone who is in the President’s inner circle of is a positive development, and effective engagement will help to ease tensions.
On the negotiations front, discussions might be ongoing among trade interlocutors of the two nations as is the case with China. It depends on how much give and take happens in these negotiations, which will lead to base tariff rates. If the discussions are successful, leaving the secondary tariff aside, the basic tariff rate might reach a level of 20%. If Indian negotiators are successful, the lowest possibility can be 15%, which will give an edge to India against exporting giants like Vietnam and Bangladesh, both of which are strong competitors to India in the apparels trade space.
If the tariff negotiations are successful and India ends at the base level of 15-20%, it will have a level playing field with competitors and provide a market for cotton exporters.
At the present situation, India has rightly zeroed the tariffs on cotton imports until the end of the year, showing positive gestures which the Indian negotiators should emphasize in their discussions. As Prime Minister Modi recently stated in his Independence Day message, India must protect its farm, dairy, and animal husbandry sectors. This is the right cause, and it is the policy of Prime Minister Modi’s government, as a large section of Indian populace relies on agriculture for their livelihood.
The customs duty reduction from the earlier 11% is a positive gesture in cotton and overall trade. From the Indian perspective, this tariff reduction may not hurt Indian agriculture drastically as the land availability for cotton against pulses and cereals, which are important protein sources, has reached its peak level. The Indian government can message this aspect to farmers and agriculture groups and focus on yield improvement in cotton, which has been the request of both textiles and cotton farming sectors. The U.S. cotton sector is dependent on an export market, and the tariff reduction by India will send a positive message throughout the U.S. Cotton Belt.
It gives flexibility to use custom duty on cotton as a trade negotiating tool and buy time to resolve the tense issue in the best interest of the two nations. The entry of a U.S. agricultural commodity to a huge market in India will satisfy one of President Trump’s demands, i.e., market entry for agriculture products.
There is an immediate appetite for quality cotton at a competitive price in India. It is up to U.S. cotton producers to compete in the Indian market against the Brazilian cotton industry. There are positive aspects in the U.S. cotton sector such as low level of contamination, low trash levels, individual bale identification, and such, that must be relayed broadly to the user community in India. The after sales support provided by the United States cotton industry is a unique selling point.
Velmurugan Shanmugam, general manager of Jayalakshmi Textiles in Aruppukkottai, India, advised that presently imported cotton comes out to be competitive against Indian cotton in terms of price and quality. His mill has booked orders for about 550 tons from two exporting countries, with the earliest arrival expected in September.
Cotton exporting nations like the United States can engage with their government and the Indian government to enhance its market size in India through proper channels.
As textiles and allied products are the largest export items from India to the United States amounting to over $10 billion, effective and pragmatic engagement by the stakeholders without escalating the situation will not only help the textile trade but also the overall trade, as cotton trade can be a solution for one of the barriers in the trade negotiations between the two nations.
While there will be short term pain for textile manufacturers in India and a likely increase in price for U. S. consumers, early outcome based on renewed and positive negotiations will help with fresh start in economic and political relations between India and the United States.
I am optimistic in this regard, as the two nations have put in enormous efforts for the past 25 years to build confidence and grow friendships.
Negotiations in the textile space will be key to breaking the ice in the overall trade discussions, and hopefully positive results will be expected soon.
Comments and opinions expressed in this article are solely those of the author.
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