India’s Textile Sector Faces Pressure As US Imposes 25% Tariff: GTRI

Srivastava highlighted that India’s labour-intensive sectors, particularly textiles, garments, and leather goods, are likely to bear the brunt of the new trade restrictions

Srivastava emphasised that instead of relying solely on trade agreements, India must urgently focus on internal reforms to enhance competitiveness

Source : Freepik

India’s textile and garment industry could face a tough road ahead after the United States, under President Donald Trump’s administration, imposed a 25 per cent tariff on Indian goods, along with an unspecified additional penalty. According to Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), this move puts Indian exporters at a disadvantage, especially when compared to regional competitors like Bangladesh and Vietnam, who are subject to lower tariff rates.

Srivastava highlighted that India’s labour-intensive sectors, particularly textiles, garments, and leather goods, are likely to bear the brunt of the new trade restrictions. “Bangladesh and Vietnam are big players in garment exports and have a better tariff position than India. This puts our textile and garment industry at a disadvantage. The same concern extends to leather goods,” he said in a sector-wise analysis.

In contrast, sectors such as auto components, steel, and aluminium are expected to see limited disruption, as tariff parity with competing nations is relatively balanced in these categories. Strategic sectors like pharmaceuticals, petroleum products, and electronics (including smartphones) have been spared from the new tariff measures.

Call For Domestic Reforms Over External Negotiations

Srivastava emphasized that instead of relying solely on trade agreements, India must urgently focus on internal reforms to enhance competitiveness. “If we manufacture good quality products at competitive prices, they will sell — with or without a trade deal. Look at China, it exports massively without relying on trade agreements,” he explained.

He also recommended reducing manufacturing costs and improving the ease of doing business to create a resilient export ecosystem. “Internal reforms are now essential. It's time for serious measures,” he added.

Tourism As A Revenue Diversification Strategy

In a broader perspective, Srivastava suggested India diversify its revenue sources. He pointed to tourism as a high-potential sector that could help offset losses from declining exports due to trade barriers. “Tourism has the potential to generate double the revenue we may lose from US tariffs,” he said.

He also cited the European Union’s upcoming Carbon Border Adjustment Mechanism (CBAM), set to take effect in 2026, as a sign of rising global protectionism and a wake-up call for India to future-proof its trade strategy.

Tariff Timeline And Policy Outlook

The new US tariffs are part of President Trump’s broader push for “reciprocal trade,” a policy he has reiterated since beginning his second term. On April 2, 2025, he signed an executive order imposing tariffs ranging from 10 per cent to 50 per cent on several trade partners, citing trade imbalances. While an initial 10 per cent baseline tariff was imposed with a 90-day abeyance on further increases, the deadline was extended to August 1, when the full 25 per cent tariff was activated for Indian goods.

Negotiations for an interim bilateral trade deal between India and the U.S. have been ongoing since March, with both sides targeting completion of the first stage by October–November 2025. However, talks have stalled over US demands to open India’s agricultural and dairy sectors — areas considered highly sensitive due to their socio-economic importance in India.

Government Response

In response to the tariff hike, Commerce and Industry Minister Piyush Goyal addressed both houses of Parliament, stating that the government is closely reviewing the situation and will take all necessary steps to protect national interests. The coming weeks are expected to be crucial as both countries attempt to balance domestic priorities with global trade expectations.

RBI MPC August 2025: Will The Central Bank Announce A Festive Rate Cut Ahead Of Diwali?