Tariffs Create Trade Opportunities for India’s Textiles
February 4, 2025 The trade war between China and the United States is intensifying, influencing trade flows, consumption, and the economy.
President Trump’s executive order imposing tariffs on Chinese imports sparked limited retaliatory tariffs from China. Additional proposed tariffs targeted Canada and Mexico, but the leaders of those respective countries negotiated with the U.S., leading to a one month pause of the tariffs but leaving uncertainty on the table.
Financial markets reacted to the tariffs news, as the Dow plunged by 600 points within 30 minutes of trading on Feb. 3.
Globally, 10% additional tariffs on Chinese goods come with pros and cons. President Trump and Chinese President Xi are expected to discuss the issue sometime this week.
The tariff regime with India remains unchanged, while EU is anticipating additional tariffs on their exports to the United States.
According to the United States Census Bureau, textiles, apparels, and shoes are among the top ten imports from China, amounting to about $28 billion in 2023.
Textiles and apparels imported into the U.S. from China will be expensive, but there are opportunities for other textiles-exporting countries like India, Vietnam, and Bangladesh to boost their exports.
In addition to textile manufacturers in cost-effective countries, online retailers from countries that are alternatives to China can benefit if the enhanced tariffs continue. American consumers who received tariff-free purchases up to $800 from China-based online retailers like Temu and Shein will feel the pain with the additional costs. This situation may shift purchases to other global online traders, providing opportunities for Indian manufacturers and retailers.
It is a coincidence that as President Trump’s tariffs were being discussed, the Indian government’s 2025-26 budget provides necessary support to boost textile manufacturing. Increased support for research, scaled-up manufacturing, and quality improvement will prove to be timely investments by India to help compete against China and other low wage countries.
Budget schemes like Production Linked Incentive, National Technical Textiles Mission, Textile Cluster Development, and Cotton Technology Mission are welcome features as India competes against China. Indian textile stakeholders should use the current tariff situation to plan for the future.
India can be a viable alternative and a formidable competitor to China based on the proposed additional tariffs against Chinese goods entering the United States. Cotton knitted trousers and breeches (USA Harmonized Tariff Schedule 6103.42.10) imposes a duty of 16.1% under the general trade regime which includes India. With an additional 10% tariff, Chinese imports will be charged at 26.1%, costing more for U.S. consumers. Such a situation would potentially shift trade from China to other competitive countries.
President Trump’s focus on China as a serious competitor and threat to national security provides opportunities for India to expand bilateral trade in textiles and in other manufacturing areas. The Indian government’s supportive budget for textile and manufacturing sectors should support an enhanced relationship with the United States.
Opinions expressed in this article are solely those of the author.
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