Navigating the Storm: The Impact of 2025 U.S. Tariffs on India’s Textile Industry

The global textile industry, a powerhouse valued at over $2 trillion, is a complex web of international supply chains, with Asia at its heart. India is a titan in this arena, a cornerstone of its economy and the world’s second-largest employer, supporting over 45 million livelihoods. But in 2025, this vital sector is facing its most significant challenge in decades, sparked by a wave of new tariffs from its largest export market: the United States. According to insights from leading market research and consulting firms, the tariff shock is reshaping global textile supply chains.

The Shock of the New Tariffs

The recent policies implemented by the Trump administration have sent shockwaves through global trade. A baseline 10% tariff on all imports, soaring to over 145% on some Chinese goods, was just the beginning. For India, a specific, punitive 25% tariff a response to geopolitical issues like oil purchases from Russia has been a devastating blow. Effective August 2025, this raised the total duty on Indian textiles to a staggering 50%, crippling the price competitiveness of a sector that sends $10.3 billion in annual exports to the U.S.

For the Indian textile sector, this was a body blow. Combined with earlier duties, effective tariffs on key products like apparel and home textiles shot up to 50%. Overnight, Indian cotton knits and denim became 30-35% more expensive than comparable products from competitors like Bangladesh or Vietnam.

The Immediate Fallout: Jobs and Livelihoods at Risk

The impact has been immediate and severe. U.S. buyers, highly sensitive to cost, are rapidly shifting orders elsewhere. Order volumes for staple products have plummeted by up to 70%.

The human cost of this economic shift is staggering. In major textile hubs like Tirupur, Noida, and Surat, production has slowed to a crawl. An estimated 100,000 to 200,000 jobs are now in jeopardy. These are not just numbers; they represent primarily women and migrant workers in stitching units, whose livelihoods are the backbone of entire local economies. Small and medium enterprises (SMEs), which form 70% of the sector, are drowning in unsold inventory and facing acute cash flow crises, with many fearing bankruptcies.

A Competitive Disadvantage

The 50% tariff wall makes Indian textiles 30-35% more expensive than identical products from competitors like Bangladesh or Vietnam, which face lower duties. U.S. buyers, driven by cost, are shifting orders rapidly. The grave risk is that this loss of market share could become permanent as global supply chains reconfigure around lower-cost producers.

Attempts to pivot to other markets like the EU or Japan are hampered by mismatched standards and higher logistics costs, offering little short-term relief. The tariffs have exposed a critical vulnerability: an over-reliance on the U.S., which buys 29% of India’s textile exports.

Market research and consulting analyses indicate that competitors like Vietnam and Bangladesh are rapidly capturing U.S. market share.

Long-Term Challenges and Strategic Pivots

The tariffs have exposed a critical vulnerability: India’s over-reliance on the U.S. market, which buys 29% of its textile exports. The potential long-term damage is profound. A projected 70% contraction in U.S.-bound exports could shave 0.5-0.9% off India’s GDP growth. Beyond the numbers, the tariffs disrupt long-standing buyer relationships, deter crucial investment in modern infrastructure, and risk permanently ceding India’s market share to Southeast Asian competitors.

The situation brings to mind the words of the great economist Adam Smith, who in The Wealth of Nations observed:

“No regulation of commerce can increase the quantity of industry in any society beyond what its capital can maintain. It can only divert a part of it into a direction into which it might not otherwise have gone.”

Yet, in this crisis lies an opportunity for transformation. Industry bodies and the government are not standing idle. A multi-pronged strategy is being deployed to navigate these turbulent waters:

• Market Diversification: A concerted push is underway to target 40 new countries, including the UK, Japan, Germany, and the UAE—markets with a combined import potential of over $590 billion, where India’s presence is currently a meager 5-6%. Business strategy consulting companies recommend targeting secondary markets like the UK, Japan, and the UAE to offset U.S. dependence.
• Leveraging Trade Agreements: Accelerating talks for a Free Trade Agreement with the EU and utilizing existing deals can provide duty-free access and stabilize exports.
• Government Support & Sustainability: Securing financial aid for SMEs and extending duty-free cotton imports are crucial short-term fixes. Simultaneously, investing in sustainable and eco-certified products is a long-term play to attract value-conscious buyers in new markets who prioritize green sourcing. According to strategy consulting companies in India, a focus on sustainability can transform India’s textile image from volume-based to value-driven.

These strategies aim not just to offset a potential $7.6 billion export drop but to position the industry for its ambitious goal of reaching $350 billion by 2030. Experts in strategy management consulting emphasize diversification and value addition as critical to surviving tariff-induced shocks.

Conclusion: A Crossroads for an Iconic Industry

The 2025 U.S. tariffs are more than a temporary trade barrier; they are a forcing function. They have brutally highlighted the need for the Indian textile industry to evolve, diversify, and add value. The path forward is difficult, requiring agility, government support, and a relentless focus on innovation and sustainability.

The ambition to become a $350 billion industry by 2030 is still within reach, but it now depends on the sector’s ability to turn this tariff-induced crisis into its greatest catalyst for change. The world is watching to see if this ancient industry can weave a new, more resilient future for itself.

As strategy management consulting frameworks suggest, resilience comes from turning crises into structured transformation.

Impact of Tariffs on the Indian Textile Industry

Introduction – Global Textile Industry Overview

The global textile industry is a dynamic sector that produces everything from fibres and fabrics to clothing, home textiles, and innovative technical textiles. In 2025, it’s valued at approximately USD 2.12 trillion, up from USD 1.98 trillion in 2024, with forecasts suggesting it will reach USD 4.02 trillion by 2034, growing at a steady 7.35% annually. This industry plays a significant role, contributing about 1.65% to global GDP and providing jobs for millions worldwide. Asia leads the charge, with countries like China, India, Bangladesh, Vietnam, and Turkey producing over 60% of the world’s textiles, thanks to cost-effective operations and efficient supply chains.

1. Indian Textile Industry Overview

India’s textile industry is a cornerstone of its economy, second only to agriculture in employment, supporting over 45 million jobs and potentially adding 35 million more by 2030. Valued at USD 195-225 billion in 2025, up from USD 138 billion, it aims to reach USD 350 billion by 2030. Exports, expected to hit USD 45 billion in 2025, are targeting USD 100 billion by 2030 at a 14% annual growth rate, making up 8.63% of India’s merchandise exports.

2. Overview of Tariffs Imposed by Trump Recently

In 2025, following his return to the presidency, Donald Trump implemented a series of reciprocal tariffs aimed at addressing trade imbalances, protecting U.S. industries, and responding to foreign practices like subsidies and oil purchases from Russia.

2.1 The Key tariffs imposed include:

• April 2, 2025: An executive order established a minimum 10% tariff on all U.S. imports, with higher rates applied to goods from 57 countries deemed to have unfair trade practices. This includes tariffs exceeding 145% on certain apparel imports from China.
• July 10-31, 2025: Announcements and modifications to reciprocal tariff rates, including threats of further increases and adjustments to baseline rates in response to ongoing trade issues.
• September 5, 2025: An additional 25% tariff on imports from India, specifically targeting its continued purchases of Russian oil, which affects various sectors, including textiles. Other notable actions include: 25% tariffs on steel and aluminum imports, echoing earlier policies but expanded in scope, and reciprocal adjustments under agreements like the U.S.-China deal, reducing some rates from 125% to 10% on specific goods while maintaining others.

Overall, these tariffs have raised the average U.S. tariff rate from under 2.5% at the start of 2025 to higher levels, generating an estimated $171.7 billion in additional federal revenue (0.56% of GDP) but sparking legal debates over their use of emergency powers like the International Emergency Economic Powers Act (IEEPA).

3. Effects on the Global Textile Industry

Trump’s 2025 tariffs have had a profound ripple effect on the global textile and apparel sector, which relies heavily on international supply chains. Below is a breakdown of key effects, focusing on workforce impacts, layoffs, and challenges.

3.1 Effects on Workforce and the resulting Layoffs

• India’s garment industry faces fears of mass layoffs, as tariffs make its textiles less competitive, potentially leading to economic downturns for workers in regions reliant on U.S. exports.
• Cambodia’s textile sector has seen added pressures on already vulnerable workers, exacerbating poverty and labor rights issues amid order cancellations.
• In the U.S., manufacturing employment has declined by 33,000 jobs overall in 2025, with 42,000 lost since the April tariffs, as higher input costs squeeze middle-class jobs in textiles and related industries.

4. Challenges

• The tariffs have introduced multiple operational and economic hurdles for the industry:
• Cost Inflation and Supply Chain Disruptions: Over 70% of surveyed U.S. fashion companies report increased sourcing costs, squeezed margins, and higher retail prices, with tariffs on cooling fabrics and apparel leading to consumer price hikes. Delays in shipments and distorted pricing have strained global value chains.
• Sourcing Shifts: Companies are reshuffling suppliers away from high-tariff countries like China, but this creates uncertainty, higher freight costs, and shortages.Backlash on U.S. Exporters: Tariffs intended to protect domestic production have raised costs for U.S. textile exporters, deterring foreign buyers and hurting small firms.
• Broader Industry Pressures: The International Apparel Federation (IAF) warns that tariffs disproportionately target garment-exporting nations, amplifying existing challenges like weak labour rights and investment uncertainty.

5. Impact of 2025 U.S. Tariffs on India’s Textile Industry

The additional 25% duties on Indian imports, effective August 27, 2025, have compounded the existing pressures from the April and July tariffs, pushing total rates to 50% and severely undermining the competitiveness of India’s textile exports to the U.S. This escalation, driven by geopolitical tensions over Russian oil, strikes at a sector that generates $10.3 billion in annual U.S.-bound shipments, primarily in apparel and home textiles.

5.1 Workforce Disruptions and Layoff Risks

U.S. tariffs have slowed production in textile hubs like Tirupur, Noida, and Surat, where U.S. orders drive significant output. In Tirupur, employing 1.25 million, 100,000-200,000 jobs, especially for women and migrant workers in stitching, are at risk. This impacts upstream spinning and processing, cutting household incomes and straining local economies.

5.2 Key Challenges

The 50% tariff structure imposes a 30-35% price premium on Indian goods relative to those from Bangladesh or Vietnam, rendering staples like cotton yarns and denim unviable without drastic margin cuts. Order volumes for these items have plummeted by up to 70%, leading to inventory buildup and liquidity crunches for SMEs that form the backbone of production.

5.3 Overall Impact

A potential 70% contraction in U.S. textile exports, from $10.8 billion to $3.2 billion, could erode 0.5-0.9 percentage points from India’s fiscal GDP growth, risking a slide below 6.5% amid broader merchandise trade shortfalls of $36-37 billion.

6. What the 2025 U.S. Tariffs Mean for India’s Textile Industry

The 50% U.S. tariffs, escalating from 25% in late August 2025, hit India’s textile sector, a cornerstone of the economy employing over 45 million and generating $10.3 billion in annual U.S. exports.

6.1 Immediate Economic and Social Fallout

U.S. tariffs cut demand by up to 70% for cotton knits and woven fabrics, threatening a $7.6 billion export revenue drop. In Tirupur, Noida, and Surat, 100,000-200,000 jobs, mainly for women and migrants, are at risk, destabilizing local economies. SMEs (70% of the sector) face unsold stock and cash flow issues, risking bankruptcy.

6.2 Competitive Disadvantages

With Indian textiles now 30-35% pricier than those from Bangladesh or Vietnam (facing 20% duties), U.S. buyers are rapidly shifting to competitors. This loss of market share risks becoming permanent, as global supply chains reorient to lower-cost producers. Efforts to redirect exports to markets like the EU or Japan are stymied by mismatched standards and higher logistics costs, leaving firms with few viable alternatives in the short term.

7. Strategies for India’s Textile Industry to Tackle U.S. Tariffs

• Tap New Markets: To reduce reliance on the U.S., which buys 29% of textile exports, India is targeting 40 countries like the UK, Japan, Germany, and the UAE, where global textile imports top $590 billion but India’s share is just 5-6%. Export councils are matching products like Tirupur’s knitwear to local demand and joining trade fairs to promote Brand India
• Use Trade Agreements: Leverage existing Free Trade Agreements with countries like the UK and speed up EU (European Union) talks to lower duties and ease market access. This spreads risk and ensures stability if U.S. tariffs increase further.
• Secure Financial Aid: Push for government support like cash grants and loan payment pauses to help small businesses manage cash flow. Extending duty-free cotton imports until December 31, 2025, cuts costs by 10-15%, helping firms take new orders now and preparing for future raw material challenges
• Adopt Sustainable Practices: Invest in eco-friendly certifications to attract buyers in new markets who prioritize green products. These strategies aim to offset the potential 70% export drop and position the industry for a $350 billion market by 2030, turning tariff challenges into growth opportunities

Conclusion:

The sector must rely on market research and consulting expertise to realign exports and identify emerging opportunities beyond the U.S. For India’s textile ecosystem, guidance from business strategy consulting companies will be crucial in achieving the $350 billion goal by 2030.