How Indian Textile Exporters Are Pivoting Post US Tariffs

The Confederation of Indian Textile Industry’s October 2025 survey revealed that over one-third of textile exporters reported a 50% drop in turnover following the imposition of US tariffs. The tariffs, comprising a 25% reciprocal duty and an additional 25% ad valorem duty (based on goods’ monetary value), came into effect on 27 August 2025 and targeted garments, fabrics and home textiles. This has led to severe inventory pile-ups and extended credit cycles, with exporters struggling to maintain liquidity. The textile sector, which contributed $21.36 billion to India’s exports in FY24, saw its August 2025 exports fall 2.73% YoY, from $3.01 billion in August 2024 to $2.93 billion.

What Indian Textile Exporters Are Considering

Here are some key steps that Indian textile exporters are considering to overcome the US tariff impact:

Shift to EU Markets

Due to the tariffs imposed by the US, exporters from India are now looking to replace that market with the European Union (EU). The EU held 28.08% of India’s textile exports in FY24. Negotiations on the EU-India free trade agreement are almost complete, with the deal expected to be signed by the end of 2025. If signed, the current duty of 8% to 12% on Indian textiles will be eliminated.

Exporters are accelerating compliance with EU sustainability norms and investing in REACH certification to gain preferential access. This strategic redirection is expected to recover $2.5–$3 billion in lost US revenue over the next 12 months.

Discounting Strategy

To retain US clients, Indian exporters have introduced aggressive discounting on bulk orders, absorbing part of the tariff burden. This has led to margin compression, with average net margins falling in September 2025. Exporters are also renegotiating Incoterms to shift freight and insurance costs to buyers, thereby reducing free on board (FOB) pricing pressure. Despite these efforts, US-bound textile exports dropped significantly in just one month.

Diversification into Technical Textiles

Exporters have begun to transition into technical textiles intended for the automotive, medical, and other industrial utilisation, which are far less tariff-impacted. The government’s Production Linked Incentive (PLI) scheme for technical textiles is also encouraging the transition.

Preferential Trade Routes

To avoid US tariffs, Indian exporters are exporting semi-finished goods to Bangladesh. Indian firms are utilising subcontracting models and joint venture agreements to take advantage of this loophole, despite the compliance risks still being high.

Digital B2B Platforms

Exporters are using B2B e-commerce platforms to get in contact with buyers in Latin America, Africa, and Southeast Asia. This was emphasised by an increase in textile vendor listings reported by TradeIndia and IndiaMART. Participants advised that this digital move is allowing exporters to reduce their participation in traditional trade fairs and physical buyer meetings, which have become significantly more expensive since the increase in tariffs on goods.

Currency Hedging

With rupee volatility rising post-tariff, exporters are increasingly using forward contracts and options. They are locking in exchange rates to protect against dollar appreciation, which could further erode competitiveness.

Lobbying for Bilateral Tariff Relief

Industry bodies are lobbying with the Ministry of Commerce to initiate bilateral tariff relief talks. The upcoming India-US Trade Policy Forum, scheduled for October 2025, is expected to address textile tariffs. Exporters are pushing for sector-specific exemptions or quota-based relief, similar to the shrimp industry’s 2019 resolution. No formal commitments have been made yet.

Conclusion

The significant drop in textile exports prompted by high US tariffs signifies a broader cause for caution by Indian stock market traders and exporters alike. For traders, the profitability of the space may be under pressure for a prolonged period, which indicates lower earnings, tighter liquidity, and valuation downgrades. At the same time, there could be some increase in volatility, as companies either absorb the tariff costs or strategically lower margins through discounts. It is worth mentioning that shifts to the EU market, technical textiles, and a growing acceptance of digital B2B platforms are encouraging long-term restructuring and repositioning, rather than an unavoidable total collapse.

For exporters, the situation highlights the importance of diversification, compliance with global standards, and smarter cost management. Many are exploring alternative trade partners, subcontracting routes, and currency hedging to protect cash flows. The outcome of the European Union (EU)-Free Trade Agreement and India-US trade talks will be crucial. Overall, staying agile, monitoring policy changes, and adapting business models appear essential in this evolving trade environment.

Sources

Press Information Bureau, Government of India
Europe India Centre of Business & Industry
The New Indian Express
Apparel Resources
Fortune India
The Economic Times
Times Now