News / Heavy tariffs create a torrid time for India's RMG exporters

Amid the tariff pushback, Indian textile and apparel exporters have begun to see a trend of US buyers pausing shipments and new orders.

Sources in Tirupur, India’s production and export hub for the sector, near Chennai, have confirmed a slowdown in the recent rebound in demand exporters saw following the disruption to rival Bangladesh supply chains.

The Tirupur cluster, touted as the “knitwear capital of India”, houses some 2,000 large factories and 20,000 ancillary units, cumulatively employing about a million people and generating some $8bn in annual turnover.

“A lot of orders have been put on hold for the US market due to the uncertainty,” KM Subramanian, president of the Tirupur Exporters’ Association (TEA), told The Loadstar.

“Buyers have accepted goods we had already shipped out,” he added, but, according to him, factories are seeing a pileup of goods due to the shipment pause, impacting production lines and resulting in “stalled orders worth no less than $35m, although we are still in the process of evaluating the impact”, he noted.

Sources in Tirupur also expressed concerns that the volatile trade conditions could leave factories facing temporary production disruptions or closures, and worker lay-offs.

Mr Subramanian said, Tirupur had been expecting to achieve some $1.4bn in exports to the US, but the higher tariffs could wipe out 50% of that target.

“The additional 25% tariff is simply unmanageable,” he said.

Indian ready-made woven and knitted garments now have the highest level of US tariffs among Washinton’s partner countries, going above 60%, if the updated scale kicks in from 28 August.  To be more precise, Indian knitted garments goods face a net tariff of 63.9%, with woven products attracting 60.3%, including the most favoured nation (MFN) status duty rate, according to government estimates.

That compares with the 36.5% tariff levied on rival Bangladesh’s ready-made garment (RMG) exports, data suggests.

“This unreasonable increase in tariff will sound the death knell for the micro-and-medium apparel industry, especially those who majority-sell to the US market, unless the government of India steps in with direct fiscal support,” said Sudhir Sekhri, chairman of the Apparel Export Promotion Council.

The US is a critical market for the Indian RMG industry, accounting for some 33% of the country’s garments exports. Its share of the US market has steadily expanded, from 4.5% in 2020 to 5.8% last year.

Last month, Indian RMG export growth noticeably fell in June, even before the August tariff announcement, according to the latest data. Total exports edged up just 1.2%, after expanding in double-digit percentages in May and April.

And local shipping sources have not reported any sign of a rush in RMG exports to beat the 27 August tariff deadline, as they believe the 25% tariff tranche, from 7 August, had already taken a toll on their competitiveness.