Pessimism is beginning to take hold within India's crucial textile and apparel industry, warns a top analyst, as the spectre of significantly higher tariffs in its largest export market, the United States, looms large. The warning comes directly from Citi's Sector General, who has observed a tangible shift in sentiment among industry stakeholders.
The Core of the Concern: Proposed US Tariff Hikes
The primary source of this growing anxiety is a recent proposal from the United States Trade Representative (USTR). The USTR has recommended a substantial increase in tariffs on a wide range of imports from China. While the move directly targets China, its ripple effects are causing deep worry in India. The fear is that US tariffs on Chinese textiles and apparel could jump from the current 7.5% to a staggering 25%. This creates a complex competitive dynamic for Indian exporters.
India's textile and apparel sector is a cornerstone of the nation's economy, employing millions and contributing significantly to export earnings. The United States is its single most important destination, absorbing a massive portion of its overseas shipments. The sector's health is therefore inextricably linked to trade policies emanating from Washington.
Why Indian Exporters Are Worried
The apprehension stems from a potential double-edged impact. Firstly, if Chinese goods become more expensive in the US market due to higher duties, it could theoretically create an opportunity for Indian products to gain market share. However, the prevailing concern is far darker. Industry experts and the Citi analysis suggest that Chinese exporters, faced with a 25% tariff wall in the US, might flood other global markets, including India's domestic market and key third-country markets, with surplus goods at aggressively low prices.
This scenario could severely undercut Indian manufacturers both at home and abroad. Furthermore, there is a lingering fear that the US administration's tough trade stance could eventually broaden to include other countries, putting India's direct exports to America in the crosshairs. The proposed tariffs are not just numbers on paper; they represent a real threat to the livelihoods tied to India's $16 billion apparel export sector.
A Shift from Cautious Optimism to Clear Pessimism
The Citi Sector General's commentary marks a notable shift in tone. For some time, the industry had maintained a stance of cautious optimism, hoping for favourable trade negotiations or minimal disruption. However, the concrete nature of the USTR proposals and the escalating US-China trade tensions have finally pierced that resilience. The analyst notes that "pessimism is now finally seeping in" among company managements and industry bodies.
This sentiment is reflected in the stock performance of major listed textile companies, which have been under pressure. Investors are pricing in the heightened risks of lower profitability, order cancellations, and intense price competition. The uncertainty is also making it difficult for businesses to plan investments and production for the coming seasons.
The potential tariff hike is part of a broader review of Section 301 tariffs on Chinese imports initiated by the USTR. The final decision and implementation timeline remain key dates that the entire Indian textile chain is watching with bated breath.
Looking Ahead: Challenges and Adaptations
Faced with this external shock, the Indian textile and apparel industry is being forced to contemplate strategic adaptations. The path forward involves several critical challenges:
- Diversification of Markets: Reducing over-reliance on the US market by aggressively pursuing trade agreements and boosting exports to the European Union, Japan, and other emerging regions.
- Enhancing Competitiveness: Investing in modernisation, scale, and efficiency to compete on quality and speed, not just price, thereby creating a more durable advantage.
- Policy Support: Seeking proactive intervention from the Indian government to negotiate favourable terms, provide export incentives, and address domestic issues like high raw material costs.
The coming months will be crucial. The warning from Citi's Sector General serves as a stark reminder that global trade winds can shift rapidly, and industries built on export success must be nimble and prepared. The initial hope that India might benefit from US-China tensions is being replaced by a more sober assessment of the collateral damage that such a large-scale trade confrontation can inflict.
