The United States’ recent decision to impose a 26 per cent reciprocal tariff (currently under a 90-day pause) on imported goods from India has stirred concern across trade circles. For India’s apparel and textile sector, it marks a turning point. With a 3.91 per cent share in global textile and apparel trade, India holds a solid position in major export markets—especially the US. The sudden tariff hike brings immediate challenges—rising costs, tougher compliance, and shrinking margins, especially when compared to nations like Brazil and Colombia, which face significantly lower tariffs, some as low as 10 per cent. Moreover, for Indian brands that have spent years building a loyal consumer base in the US, the implications are two-fold: reduced affordability for consumers and intensified competition from countries offering similar product quality at more competitive prices. The temporary reprieve owing to the 90-day pause on the implementation of reciprocal tariffs offers breathing room for Indian exporters to assess strategies, realign pricing models, and prepare for possible enforcement post-pause.

While the overall landscape is tense, it is not entirely bleak. A closer look at the tariff structure reveals a potential upside for India. The US has proposed even steeper reciprocal tariffs on several of India’s key competitors—Vietnam (46 per cent), Bangladesh (37 per cent), and China (34 per cent). This gap directly enhances India's price competitiveness, particularly in segments where quality and cost balance are critical. If these tariffs are implemented post-pause, this relative advantage could translate into a shift in order volumes from overexposed regions to Indian manufacturers, leading to increased exports, stronger bilateral ties, and a more prominent role in global supply chains. This moment presents an opportunity for India to strengthen its foothold, especially in sectors like sustainable fabrics, traditional weaves, and functional wear—areas where India already enjoys a stronghold.

Preparing for Policy Disruptions
The new regime demands a shift in mindset for Indian businesses selling into the US. To ensure smoother access to the US market, the exporters must reassess and reinforce compliance. It is essential to align with not just the international trade norms but also with the US state-level tax requirements as non-compliance could mean losing access to one of their most crucial markets. Any slip-up, whether in tax calculation or labelling—can result in penalties, shipment delays, or a loss of customer trust. Hence, businesses must focus on strategic investments on automated tax compliance tools and view it as an asset rather than an expense, as staying compliant will be critical to long-term success.

The ripple effects of these tariffs will also travel deep into supply chains. Manufacturers operating on slim margins or depending on imported raw materials could feel the pinch the hardest. Stricter compliance checks, customs clearance delays, and extensive documentation requirements could lead to extended delivery timelines, making it essential for exporters to revisit their shipping schedules and maintain transparency with customers to maintain trust. Even with the temporary tariff pause, this is not the time for complacency. Businesses relying on multi-country supply chains must rethink their sourcing models, possibly leaning on partners in countries with preferential trade agreements. Exporters should use this window to upgrade their systems to stay abreast of frequent tariff adjustments, remain vigilant in determining duties and compliance requirements, and invest in solutions that help them keep pace with evolving trade policies.

Scope for Market Diversification
The changing trade landscape due to the possible tariff imposition also encourages a much-needed shift from commodity-driven exports to high-value segments. For example, heritage fashion, bridal couture, and artisanal textiles showcase India’s craftsmanship and uniqueness that no other region can easily duplicate. These segments inherently command premium pricing, offering a cushion against the impact of tariffs. Also significant is the adoption of increasing international demand for sustainable fashion. As India’s age-old forte lies in organic fibres, natural pigments, and environmentally friendly production processes, sustainability can be positioned as an essential brand identity. Space can be carved out in premium US markets by incorporating eco-conscious and biotechnology-led innovations, such as natural plant dyes and biodegradable materials.

At the same time, the foray into technical textile and performance wear segments has strong growth prospects. These segments address high-demanding sportswear, healthcare, and infrastructure segments with improved margins even at a higher capital cost. To enable this transition, the Government of India has announced the Production Linked Incentive (PLI) scheme for textiles with a budget of ₹10,683 crore. The programme centres on enhancing the production of technical textiles and man-made fibres by encouraging investment towards capacity expansion and innovations. This directly complements the broader ‘Make in India’ mission, where textiles and apparel are recognised as vital for job creation and export expansion. The sector also aligns with national priorities like Skill India, Women’s Empowerment, and Rural Youth Employment. Currently producing around 22,000 million garments annually, the industry is on track to nearly double its market size, from $174 billion to $350 billion by 2030. This places India in a position to harvest alternative, higher-value segments alongside traditional exports.

Furthermore, this shift made Indian businesses rethink market dependencies. Relying heavily on a single export destination, particularly one facing policy volatility, can leave exporters vulnerable. The tariff hike serves as a wake-up call for Indian textile players to actively diversify into markets where India has free trade agreements (FTAs) or is progressing towards them. Regions such as the EU, UAE, Japan, and Australia show a strong appetite for quality textiles. They increasingly prioritise sustainable and specialty products, areas where India has a natural advantage.

Ultimately, forming strategic partnerships with manufacturers in FTA-aligned countries can act as effective tariff shields, helping Indian brands retain their foothold in the US market through joint ventures or integrated supply chains. This dual-track approach, expanding into receptive markets while tapping into tariff-safe alliances, can future-proof India’s textile exports. But navigating this shift also calls for a serious rethinking of supply chains, with an emphasis on agility, transparency, diversification, and compliance. Retrospective penalties for non-compliance can be severe, making it imperative for Indian exporters to proactively align with US trade and tax regulations. The key for Indian exporters will be to sell smarter, optimise pricing strategies, and stay compliant to hold their ground in one of their most critical markets. In turning a challenge into an inflection point, the industry can build long-term resilience and reposition itself as a premium player on the global stage.