Indian textile exporters may lose competitiveness despite lower US tariff as rival countries get quota exemptions: Report
New Delhi, July 27
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 exemptions, according to an Emkay Research report.
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.
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.
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.
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.
— ANI
Reader Comments
It's frustrating to see this pattern repeat—India gets a 'favour' that's actually not that favourable when you look at the fine print. The TRQ exemptions for Bangladesh and Cambodia give them a real leg-up. Our textile hubs in Surat and Tirupur must be worried. The US is playing a clever game here; we need smarter negotiators in Delhi.
I run a small export unit in Coimbatore, and this news is worrying. We rely on US orders for about 40% of our business. While 10% tariff is better than 22% for China, losing out on the TRQ means our margins are still squeezed. Every percentage point matters when you're fighting on cost. Hope the government takes this seriously.
Interesting but complicated. The fact that our exports have already recovered after the IEEPA tariffs were struck down shows we have resilience. But these new Section 301 tariffs and the TRQ loopholes for others seem designed to push us towards a bilateral deal. Modi and Trump need to sit down and sort this out—Make in India needs US access too. 🇮🇳🤝🇺🇸
From a business perspective, this is like a game of chess. India has a lower base tariff, but the TRQ exemptions for competitors using US cotton create a hidden disadvantage. The report's advice on bilateral negotiations is spot on—we need to lock in preferential access before further Section 301 investigations hit us. Time for proactive diplomacy.
This is the kind of nuanced news that should get more attention. Most
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