Textiles sector eyes zero tariffs in India-US trade

New Delhi: Zero for zero is the buzzword in India’s textile and apparel industry as sector leaders urged the government to push for nil tariffs either way for trade between India and the US. Such a move, coming in the backdrop of the US increasing tariffs on some countries, is seen as something that could move the needle towards India in its textile and apparel exports to the world’s second-largest market.

According to Prabhu Dhamodharan, convenor of the Indian Texpreneurs Federation (ITF), India's current 5.9% share in US apparel imports could increase to 10% if zero-duty access is secured. “Zero-for-zero duty is the textile industry's wish, and if we get that, nothing could be better for the industry,” Dhamodharan told Mint over phone.

The industry inputs come in the backdrop of an India team camping in Washington to thrash out a bilateral trade agreement (BTA) with the US that would seek to avoid reciprocal tariffs on critical goods such as textiles, engineering goods, drugs and pharmaceuticals, and electronics goods.

According to a commerce ministry official, who spoke on the condition of anonymity, the department has taken note of the demands and suggestions from the industry. The proposed BTA will be positive for the sector, this official said.

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In response to an emailed query, a spokesperson for the US Embassy in New Delhi said, “Our leaders have set a bold new goal for bilateral trade—Mission 500—which aims to more than double total trade to $500 billion by 2030.”

Queries emailed to the textiles secretary, spokespersons of the US trade representative (USTR), and Indian ministries of commerce and textiles remained unanswered till press time.

The global trade scenario

The US is the world’s second-largest market for textiles and apparel, accounting for 15% of global exports. India has a trade surplus with the US in textiles and apparel. In 2024, the US imported about $10.8 billion worth of textiles and apparel from India, while its exports to India were much lower at $0.41 billion.

India mainly buys fibre products from the US, with cotton accounting for over half of these imports. In contrast, India’s exports to the US are mostly apparel and home textiles, accounting for 81.5% of total shipments.

Meanwhile, the US has imposed (and subsequently paused) 25% tariffs on all imports from Canada and Mexico, till 2 April.

It has also imposed a 10% tariff on China on 1 February and another 10% on 4 March. In turn, China has announced an additional 15% tariff on US cotton, which will come into effect on 10 March. These developments are expected by the industry to indirectly benefit India, as Chinese products will become costlier and US cotton exports to China will not be profitable.

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Further, when the US’s 25% tariff on Mexico comes into effect, the cotton apparel opportunity is expected to shift to India and Bangladesh, while the man-made fibre apparel, such as Lycra and nylon wear, will likely move to Vietnam and Cambodia, according to experts. The share of Mexico in US apparel imports is 3.3%, and it mainly exports knitwear and denim, among others.

After the tariffs between the US and these countries come into effect, experts said the major destinations for US textile imports will be Vietnam, Bangladesh, and India.

As per Office of Textiles and Apparel (OTEXA) trade data, US apparel imports in CY2024 stood at $79.26 billion. India’s share of this was 5.9%, amounting to about $4.68 billion. China was the top exporter of apparel to the US, holding a 21% share amounting to around $16.64 billion, followed by Vietnam at 19% ($15.06 billion) and Bangladesh at 9.3% ($7.37 billion).

What Indian experts have said

“The US is a very important market for us, as it imports around $70 billion worth of apparel every year,” said Dhamodaran of ITF. “Our market share has improved by only 1% in the last four years, meaning we have grown from 5% to 6% now. China remains the dominant player, followed by Vietnam and Bangladesh, while we hold the fourth position.”

Dhamodaran added that Indian negotiators should offer leverage in technology and cotton exports to the US while seeking duty concessions for Indian textile products in return, “as we need to create jobs, and labour-intensive sectors like textiles and leather will provide that opportunity”.

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According to a report by Global Trade Research Initiative (GTRI) released on 25 February, US exports to India face an average duty of 10.14%, while Indian textiles, fabric, yarn, and fibre face an average duty of 3.55%, resulting in a tariff difference of 6.59%. The trade think tank suggested in the report that the 'zero-for-zero' tariff strategy is India’s best option and could be implemented quickly.

“A more proactive approach would be for India to propose eliminating tariffs on most industrial products, provided the US reciprocates,” the GTRI report stated, adding that agriculture should be excluded from the negotiations. “India should identify tariff lines where duty cuts would not harm domestic industries, drawing from its past FTA offers to Japan, Korea, and Asean.”

However, Raja Shanmugam, a knitwear exporter and former president of the Tiruppur Exporters’ Association, cautioned the government to keeping in mind the interests of Indian cotton farmers while making policy shifts. He noted that while cheaper US cotton may scale up the garment sector, it could also encroach upon the market share of Indian farmers.

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The Confederation of Indian Textile Industry (CITI), too, suggested setting up a quota for cotton imports from the US to safeguard Indian farmers, even while it also batted for a zero-for-zero policy on textiles and apparel exports.

“As India remains dependent on US cotton imports, a duty-free access mechanism with quota safeguards could ensure a balanced trade approach,” said CITI chairman Rakesh Mehra. “With strategic negotiations and industry-government collaboration, India is well-positioned to seize this transformative opportunity in the US textiles and apparel market.”

Fall in production and exports

To be sure, in recent years, India has witnessed a sharp decline in cotton production, often referred to as ‘white gold’. According to data from the textiles ministry, annual cotton production stood at 37 million bales (170 kg each) in 2017-18, which steadily declined over the years to 34.7 million bales in 2022-23. Production is estimated to shrink further to 31.6 million bales in 2023-24.

The overall textiles exports have witnessed a declining trend, starting with $33.83 billion in FY20, dropping to $29.46 billion in FY21. Although exports rose to $41.12 billion in FY22, they then decreased to $35.55 billion in FY23 and it reduced further to $34.40 billion in FY24.

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