How US tariffs are unraveling India’s textile business | Trade War | USAEMALL.com

Ludhiana, India – On the floor of a Ludhiana spinning mill, 29-year-old Pankaj Kumar stands at his station, his fingers a blur as he knots loose threads and feeds them onto a spinning wheel. The yarn will soon make its way to the city’s textile factories, which produce woollen knitwear, hosiery, and other garments, much of it destined for the United States.

Kumar has worked in different spinneries for nearly a decade, but for the past four months, this one has been his livelihood, bringing in 18,000 rupees ($203.87) a month. But now that US President Donald Trump has slapped India with 50 percent tariffs, Kumar’s income is uncertain. “I don’t know,” he says. “The factory owner was saying we are unsure how much to manufacture in the coming months. They might not need me.”

Rajesh Kumar, who manages the unit, told Al Jazeera that orders for yarn have plunged by nearly 30 percent in just two weeks since the US rolled out a sweeping 50 percent tariff on Indian goods – a two-tiered levy which took full effect on August 27. Of that, the first 25 percent kicked in on August 7 and was later doubled as punishment for India’s imports of Russian oil.

“The local textile factories we supply are telling us there’s uncertainty in future US orders,” he said. “Until that clears, new production cannot be planned.”

India has denounced the tariff hike as “unfair” and “unjustified”. But the shock is already rippling through textile units across the country. The sector contributes about 2.3 percent to India’s gross domestic product (GDP), 13 percent to industrial production, and 12 percent to total exports. It is also the second-largest employer after agriculture, providing direct work to more than 45 million people, many of them women and members of the rural workforce.

The blow is particularly sharp because the industry relies heavily on the US, which is one of India’s largest markets for textiles and apparel. In 2024, India reportedly supplied roughly 6 percent of US apparel imports, amounting to $4.8bn. That represented nearly one-third of India’s total apparel exports, and a significant share of its broader textile exports.

No new orders

Ludhiana, one of India’s biggest textile hubs in the northwestern state of Punjab, is particularly exposed. Each year, the city ships approximately $700m worth of hosiery and knitwear – especially woollens – to the US, and the industry here employs more than 500,000 workers.

Ashwin Aggarwal, head of garment exports at Nahar Industries, which supplies to brands, such as GAP, Tommy Hilfiger and Phillips-Van Heusen Corp in the US, said the company exports garments worth about $35m to $40m annually. Business has slowed dramatically since the 50 percent tariff came into effect, he said.

“We have not received any fresh orders since the announcement,” he said. “Smaller brands that used to procure from us have already told us they will not place orders any more. The larger ones, tied into longer contracts, will at least allow the current production cycle to finish – but they are insisting we absorb 25 percent of the tariff burden. That makes operations brutally cut-throat, with margins collapsing. If we cannot find alternative ways to stay competitive, we may be forced to lay off people.”

Trump’s earlier tariff proposal in April – launching with a 10 percent universal duty and setting India’s rate at 26 percent, lower than those for rival garment hubs like Bangladesh, Vietnam, and China – had briefly raised hopes that India could expand its share of the $16bn US apparel market. But with India now at the highest tariff tier, compared with 20 percent for Bangladesh and Vietnam, 19 percent for Pakistan, and 30 percent for China, those expectations have collapsed.

The Confederation of Indian Industry (CII), an industry body, has warned that the tariff hike could be devastating. Amit Thapar, chairman of CII’s Northern Region Export Promotion Committee, described the move as “not just a dent to our profits – it’s a death knell for our competitiveness and survival”.

Thapar noted that even the raw materials that Indian firms source from overseas to use in their products are faced with these levies. He added that the measure seems more like a form of punishment and is raising serious concerns about potential disruptions to supply chains.

Ludhiana is far from the only city at risk. Other textile-rich hubs such as Tiruppur, Panipat, Surat, Bikaner, and Coimbatore are also facing precarious conditions.

Panipat in Haryana, one of the world’s largest textile recycling hubs and India’s biggest supplier of blankets, carpets, and shoddy yarn, has an export turnover of about 200 billion rupees ($2.2bn). Of this, home textiles alone account for about 120 billion rupees ($1.3bn) in annual sales to the US, making up roughly 60 percent of the city’s total exports.

Rakesh Kumar Goyal, who runs an industrial unit in Panipat and supplies materials such as towels, cushion covers, and rugs primarily to Brazil and countries in Africa, had been in exploratory talks to supply to US retailers, such as Walmart, IKEA and H&M Home. But those plans have come to a screeching halt now.

“If the tariffs remain in place, suppliers to the US will begin scouting other markets where we may currently have a niche, and that will only intensify competition for us,” he says.

Vinod Dhamija, president of the Haryana Chamber of Commerce and Industry, said, “Some industry owners are now considering rerouting their supply chains through countries such as Bangladesh or Vietnam to facilitate exports to the US. Exporters are either planning to set up warehouse facilities in these countries and carry out minimal value addition there, or are in talks with US importers for additional support to make this arrangement viable. If the current tariffs remain in place, this could mark a significant shift in trade strategy.”

‘No further shipments’

In Tiruppur, a southern city in Tamil Nadu that accounts for 68 percent of India’s knitwear exports, orders halted when the 50 percent levy was announced in early August. The blow is particularly cruel as Tamil Nadu’s textile belt had actually been gearing up for a rebound in US demand on the back of the initial round of higher tariffs on other countries. Many exporters had invested in new machinery, anticipating a surge in orders, including from the India-UK free trade agreement.

But all of that is gone now.

Kumar Duraisamy, joint secretary of the Tiruppur Exporters Association, told Al Jazeera that when levies of 25 percent were announced, buyers gave suppliers a deadline and told them to ship whatever was ready by August 27 and asked them to absorb part of the tariff, conditions that they agreed to. But with the additional 25 percent, orders were effectively put on hold.

Tamil Nadu Chief Minister MK Stalin has appealed to Prime Minister Narendra Modi for urgent intervention as the state has a high dependence on the US market for its exports.

A large share of these workers are home-based, many are women and at the very end of the production chain, said Mary Anuklatham of Social Awareness and Voluntary Education in Tiruppur. “The immediate impacts are not yet visible for home-based workers, but if the tariff remains in place, the coming months could be devastating. Women already earn less than a dollar a day and may find themselves deprived even of that.”

Thapar said that even if the government cannot safeguard their profits, some form of support is essential to prevent losses and layoffs. He warned that without timely intervention, there is a real risk of job losses across the country’s textile hubs.