Trump Tariff Impact: US Retailers Weigh Options as Tariff Hike Hits Indian Textile Exports

Top US retailers have begun discussions with Indian textile exporters to decide how to proceed in the wake of the increase in US tariffs, several exporters have told NDTV Profit.

On Wednesday, President Trump slapped an additional 25% tariff on India over its import of Russian oil, bringing the total levy to 50% — the steepest tariff the US has ever placed on a major Asian partner.

While the first layer of duties has taken off, the new rate hits on August 27.

With these revised rates, the overall tariff would exceed 50% in certain products. For instance, knitted apparel could face a duty of 64%, while woven apparel would attract 60.3%.

Concerns are mounting in Tiruppur, a textile hub in southern India, home to 20,000 manufacturing units, with over 2,500 producing ready-made garments for exports.

"My US buyer asked me to stop a shipment of cotton T-shirts and dresses worth $80,000, as it was not possible to pass the extra costs on to their clients... They want us to lower the price," a Tiruppur-based exporter operating since 2002 said on condition of anonymity, citing business concerns.

Some exporters said they might offer some discounts to avoid inventory pile up and shoo away buyers. "Some buyers are also increasing end-retail prices, which could reduce demand, but a 50% increase is not sustainable."

Top Indian textile companies garner 40-70% of their sales in the US, with analysts fearing higher tariffs could shift orders to Vietnam and Bangladesh, which now have lower US duties of 20% each.

In an interview with NDTV Profit, the management of Gokaldas Exports said "brands are having discussions with us to find alternatives and options if we have any additional capacities in regions with lower tariffs."

This has led to ongoing price renegotiations and partial pass-through to consumers. Gokaldas U.S. clients include GAP, Walmart and JCPenney.

Gokaldas said in a recent post-earnings conference call that subdued pricing power is weighing on profit margins it expects the impact to persist throughout the second half of this fiscal.

The US is the largest export destination for Indian textiles and apparel accounting for 28% of total exports valued at $36.61 billion in FY25. Between January to May, the US imported textiles and apparel worth $4.59 billion from India — a 13% increase compared to last year. India has a 5.8% share in the US garment market, behind China, Vietnam and Bangladesh.

Trump's tariff salvo has caused concern among exporters, who had hoped for a bilateral trade deal and were preparing for a rise in demand. Many of them even downplayed Trump's tariff threats in the past, noting that imposing higher tariffs by the US would ultimately lead to increased costs for Americans — a situation that the US President may prefer to avoid.

But now as buyers start walking away, industry executives warn that sustained high tariffs could harm the domestic textile and apparel sector. Without a trade deal, such steep tariff could cause 30-40% drop in US-bound orders, leading to $3-4 billion loss in exports this fiscal, they said. While big players can withstand the crisis for 4-5 months, smaller exporters may not be able to sustain losses and could be forced to wind up.

"The proposed 50% tariff will increase the cost of Indian apparel by 30–35% compared to alternatives from countries like Bangladesh and Vietnam," said Rahul Mehta, chief mentor of Clothing Manufacturers Association of India, which represents around 20,000 manufacturers and exporters. "Why would anyone pay such high rates? It's a very stressful situation... Not only has existing shipments stopped, but we could also see a big drop in export orders, potentially leading to factory closures and unemployment."

About $1 billion worth of goods are either ready or in the pipeline but will not make the August 27 deadline. For these, buyers are asking for discounts ranging from 25-30%, according to Sudhir Sekhri, chairman of Apparel Export Promotion Council — the official body of apparel exporters in India.

"If the 50% tariff remains in effect, orders to be the tune of $3 billion could move out from India as no exporters, be it big or small, will be able to absorb such high tariffs," he said adding that "some exporters might as well have to wish their US business goodbye altogether as orders meant for spring and summer 2026 season move to other countries."

To avoid the 25% additional duty, the goods must be cleared in the US by September 16. In some cases, there is a rush to deliver to beat the deadline for the imposition of the additional tariff.

"Only if an exporter opts for air freight can the cargo arrive in time by paying the 25% duty," explained Ajay Sahai, director general, Federation of Indian Export Organisations. "However, it takes 40-45 days for goods to reach the US when sent by sea... So even if the orders are dispatched today (by sea), it is not possible to beat the 50% tariff."

The exporters fraternity is now pinning their hopes on some kind of agreement between India and US before September, putting an end to the trade uncertainty and giving them time to ramp up seasonal production.

A US delegation is expected to visit India for another round of talks from August 25 to 29. "Negotiations are the only way forward," Sahai said. "If we can reach a breakthrough in a month, the damage will be less. Without a trade deal, we should expect setbacks in exports—that's unavoidable."

Trump's revised tariff announcement has come "as a shock", said A Sakthivel, chairman of Tiruppur Exporters Association. "When the tariff was first raised to 25%, buyers were still willing to negotiate discounts and share the extra cost... but 50% is arbitrary... We expect some kind of agreement will be reached between the two nations in the coming weeks."

CMAI's Mehta believes the 50% tariff could be transitory and seen as a "typical American bargaining tactic" to get what they want from its trading partner.