US Tariffs May Erode Indian Textile Exporters' Competitive Edge

Indian textile exporters may lose their US market edge despite a lower 10% tariff, as competitors like Bangladesh received tariff-rate quota exemptions that India did not, an Emkay Research report warns. This creates a competitive disadvantage.

Representative Image (File Photo/ANI)

Indian textile and apparel exporters could lose some of their competitive edge in the US market despite India being placed in a relatively favourable tariff bracket under the new US Section 301 measures, as competing countries have secured tariff-rate quota (TRQ) exemptions, according to an Emkay Research report.

Tariff Disadvantage Despite Lower Rate

The report said India has been subjected to a 10 per cent Section 301 tariff, lower than the 12.5 per cent imposed on countries such as China, Vietnam, Brazil and Thailand. However, it noted that Indian textile exporters did not receive TRQ exemptions that were extended to several competing nations.

"Indian textile and apparel exports have not received tariff-rate quota (TRQ) exemptions under the Section 301 tariffs, which were awarded to the likes of Bangladesh, Cambodia, Indonesia, and Malaysia," the report said.

It added that the exemptions apply to specified volumes of textile and apparel imports made using US-origin cotton and fibre. "Hence, while the tariff burden remains at 10%, there will be a relative loss of competitiveness for Indian textile exporters vs key competitors," Emkay said.

India's Overall Position in US Tariff Regime

The report noted that India remains one of the relative beneficiaries of the new US tariff regime overall. It estimated India's effective tariff rate in the US at around 12 per cent, lower than Bangladesh at around 25 per cent, China at around 22 per cent, and Vietnam and Indonesia at around 14 per cent each.

According to the report, nearly 55 per cent of India's exports to the US will attract the additional 10 per cent tariff, while the remaining 45 per cent are either exempt, including products such as generic pharmaceuticals and smartphones, or are already covered under separate Section 232 tariffs applicable to sectors such as steel, aluminium and auto parts.

Export Recovery and Near-Term Impact

Emkay said India's exports to the US have already shown a marked recovery after the earlier IEEPA tariffs were struck down earlier this year. "India's exports to the US saw a marked improvement after the IEEPA tariffs were ruled unlawful... India's monthly exports to the US have averaged USD 8.4bn in the four months since, vs USD 6.5bn in the prior six months," the report said.

The brokerage expects the new Section 301 tariffs to have only a limited impact on India's overall export trajectory in the near term, with the country's relatively lower tariff rate potentially offering marginal benefits over some competing exporters.

Future Risks and Bilateral Negotiations

However, it cautioned that further Section 301 investigations by the US into excess manufacturing capacity could result in additional tariffs on India. "In this context, ongoing negotiations on the India-US bilateral trade deal will be crucial to ensure a lower tariff rate and preferential access for Indian exports in the US market," the report said.

(Except for the headline, this story has not been edited by Asianet Newsable English staff and is published from a syndicated feed.)