Indian textile and apparel exporters can breathe a sigh of relief as the US and India have negotiated a reduced reciprocal tariff of 18% on Indian goods, giving Indian exports an edge over peers.
The breakthrough, combined with the expected gains from free trade agreements (FTAs) with the European Union and the UK, puts Indian apparel exporters in a better position than a year ago.
Shares of exporters with an overwhelming exposure to the US, such as Gokaldas Exports Ltd, Welspun Living Ltd, Indo Count Industries Ltd, Kitex Garments Ltd, and Faze Three Ltd, were locked in the upper circuit as of 1pm on Tuesday. Other scrips with higher free float, such as Raymond Lifestyle Ltd (5%) and KPR Mills Ltd (17%), also made handsome gains.
Tariff impact
The 50% cumulative tariffs on India, including 25% reciprocal tariffs and 25% punitive tariffs for buying Russian crude oil, had driven a significant share of the textile export business to rival markets such as Vietnam and Bangladesh, which had relatively better tariff terms. This was despite Indian exporters offering steep discounts—to the extent of losing money in many cases—and also benefiting from an over 5% dip in the Indian rupee.
While the two nations have reached an agreement to lower tariffs, the full benefit will take at least five to six months to take effect, said Raja Shanmugam, an apparel exporter based in Tiruppur, Tamil Nadu, one of India’s key textile hubs.
“A lot of buyers went away from India to other countries due to the US-India trade disruptions, and these buyers will take time back to doing business with India as they already have contracts with other countries now,” he said.
Apparel exporters have already booked most of the orders for the Fall-Autumn 2026 collection, which will start shipping from May to October. While some incremental orders for this collection are expected to come in after the trade deal announcement, the full benefit will come from the Spring-Summer 2027 collection, the orders for which will be booked in the coming months, and shipments will start from November, said Narendra Goenka, the owner of Texport Industries, a leading privately-held apparel exporter.
“We spoke to customers last night, and they would like to shift some business to India from the competition,” said Goenka, who is also the past chairman of Apparel Export Promotion Council (AEPC), the industry body of apparel exporters in India.
At 18%, India will face the lowest US tariff among peers such as Vietnam (20%), Bangladesh (20%), Indonesia (19%), and China (34%), giving it a relative advantage when exporting to the largest market for textiles and apparel.
To be sure, the 18% rate is still higher than the 7-16.5% tariffs paid by Indian exporters on different categories of textiles and apparel prior to the tariff escalations that started in mid-2025.
Advantage India
The announcement of a trade deal between India and the US comes just days after the India-EU free trade deal, which promises to eliminate India’s tariff disadvantage in exporting to another key market.
India faces 9-12% tariffs across various product categories when exporting to the EU. The trade deal, once effective, promises to bring this down to zero, putting India at an equal footing with its two largest competitors in the apparel export market—Bangladesh and Vietnam—both of which already enjoy duty-free access to Europe.
“With the India-EU and the India-US trade deal happening simultaneously, there will be a need to manufacture and supply more, which also implies more labour. We are also exploring expanding our manufacturing units to meet the increased demand,” said Alexander John, chief executive of NC John Garments, which supplies to the Walt Disney Co. in the US.
Madhur Singhal, managing partner (consumer & internet) at consulting firm Praxis Global Alliance: “Across India’s trade agreements over the years, labour-intensive textile MSMEs such as Surat’s man-made fibre and processing cluster have seen mixed employment outcomes. While global demand cycles and competitive pressures have limited immediate job creation, the intent of these trade deals is to improve market access and restore competitiveness over time. In MSME-heavy clusters, employment impact typically plays out gradually through higher utilisation and steadier orders rather than headline job additions or losses.”
“There is no immediate expectation of tariffs moving to zero under the US–India trade deal. The reduction to 18% matters because B2B textiles and B2B jewellery operate on thin margins, where even partial tariff corrections significantly impact landed-cost competitiveness. Just as cost increases in the past were shared between buyers and suppliers, the benefits of this correction will also be shared, with pricing gradually reverting closer to historical norms, Singhal added.”
The two trade agreements provide several opportunities for diversified markets to Indian exporters and can accelerate scale-up plans for many textile and apparel categories, said Suketu Shah, CEO, Vishal Fabrics Ltd.
“We think the true impact will be a function of how quickly the changes can be implemented and how well manufacturers can navigate cost and scale,” he said.
The US (29%) and the EU (20%) account for half of India’s annual textile and apparel exports of $36.7 billion, according to government estimates.
Talking about the benefit of the EU deal, India’s minister for commerce and trade, Piyush Goyal, said last week it would have a “tremendous potential” for job creation in India.
“Now, we see before our eyes a potential to grow from $7 billion to at least $30-40 billion very quickly in the textile sector alone,” he said.
