Trump's tariffs should not trigger alarm or panic
The textile industry in India is bracing for a significant shake-up as bold structural reforms and strategic investments become necessary to counter the effects of President Trump's 25% tariffs on Indian exports.
The tariffs, which aim to transform the US economy into a technology-driven manufacturing powerhouse, could have far-reaching consequences for key Indian employment sectors such as textiles, apparel, gems and jewellery, and food and agricultural products. These sectors are significant employers in India and heavily rely on exports to the US market.
Higher US tariffs, enforced under measures like Executive Order 14257, can increase costs for Indian exporters, reduce their competitiveness in the US, and lead to lower export volumes. In the worst-case scenario, these tariffs may shave off only 0.2-0.3 percentage points from India's GDP.
The textiles and apparel sectors could face a decline in demand from the US due to higher tariffs, risking substantial job cuts among millions employed in garment manufacturing. Export-dependent sectors like gems and jewellery could see reduced sales volumes and profitability, threatening jobs and small to medium enterprises. Food and agricultural products could also suffer as tariffs raise export costs, potentially reducing rural employment linked to farming and processing activities.
India's economy is not heavily reliant on exports, but the immediate effect of the tariffs tends to be increased costs for Indian exporters and strain on employment in export-heavy sectors. To mitigate these challenges, the government is focusing on providing easier credit access to exporters, tax breaks and GST relief to MSMEs, and liberal incentives like PLI to attract foreign firms.
India should also proactively seek new markets in East Africa, Latin America, Southeast Asia, and the Middle East to diversify its export destinations. The country has trade agreements with several countries, including Japan, the UAE, Singapore, Australia, Thailand, South Korea, and the EU, which can be leveraged to expand its market reach.
In the textile sector, India has lost ground to competitors like Bangladesh and Vietnam due to cost and infrastructure inefficiencies. To regain its competitive edge, India should prioritise precision engineering, green technology, and advanced machinery instead of low-margin assembly operations.
The tariffs could cost India $20-30 billion in export revenues in the short term. However, sectors like pharmaceuticals, which is a top export product to the US, are not directly affected by these tariffs. The focus should be on modernising textile clusters, improving port access, subsidising energy, and moving up the value chain to create more high-value jobs.
The IMF has raised India's GDP growth forecast to 6.4% for 2025 and 2026, indicating a resilient economy despite the challenges posed by the tariffs. The writer suggests resisting the purchase of American weapons and strengthening self-reliance in defence manufacturing to further bolster India's economic independence.
References:
- India Inc: How Trump's Tariffs Could Impact Indian Exports
- Impact of Trump's Tariffs on India
- The textile industry in India is preparing for a notable transformation due to structural reforms and strategic investments, as a response to President Trump's 25% tariffs on Indian exports.
- These tariffs, intended to transform the US economy into a technology-driven manufacturing powerhouse, may cause significant consequences for sectors like textiles, apparel, gems and jewellery, and food and agricultural products in India.
- India's textiles and apparel sectors could experience a decline in demand from the US because of higher tariffs, possibly resulting in substantial job cuts among millions involved in garment manufacturing.
- Export-dependent sectors, such as gems and jewellery, could face reduced sales volumes and profitability, risking jobs and small to medium enterprises.
- To counteract the challenges posed by the tariffs, the Indian government is focusing on providing easier credit access to exporters, tax breaks, and GST relief to MSMEs, as well as liberal incentives like PLI to attract foreign firms.
- In a bid to diversify export destinations, India should seek new markets in East Africa, Latin America, Southeast Asia, and the Middle East. India has trade agreements with countries such as Japan, the UAE, Singapore, Australia, Thailand, South Korea, and the EU that can be utilized to expand market reach.
- To regain its competitive edge in the textile sector, India should prioritize precision engineering, green technology, and advanced machinery rather than low-margin assembly operations. Additionally, the focus should be on modernizing textile clusters, improving port access, subsidizing energy, and moving up the value chain to create more high-value jobs.
