India–US Interim Trade Deal Set to Revive Apparel and Textile Exports

India’s apparel and textile industry has welcomed the interim trade agreement framework between India and the United States, calling it a major breakthrough after months of uncertainty caused by steep US tariffs. Industry leaders have described the pact as a turning point that could restore export momentum, improve price competitiveness, and rebuild confidence among American buyers who had slowed or shifted sourcing away from India.

The agreement reduces earlier punitive tariffs and introduces a reciprocal tariff structure of 18% on most Indian goods entering the US market, including textiles and apparel. This represents a significant improvement from the earlier tariff levels that had reached as high as 50% on certain product categories. Exporters believe the new framework brings much-needed clarity and predictability, allowing Indian manufacturers to better plan production and pricing for the upcoming seasons.

US President Donald Trump with Prime Minister Narendra Modi. | India Today

Industry Relief After Months of Export Pressure

For much of 2025, Indian apparel exporters faced severe disruptions due to elevated US duties. Higher tariffs led to order cancellations, reduced factory utilisation, and financial stress across major textile hubs such as Tiruppur, Ludhiana, Surat, and Noida. Industry estimates suggested that billions of rupees in exports were at risk, while several factories warned of potential job losses due to falling margins.

With the new interim framework in place, exporters say the situation is beginning to stabilise. Industry associations such as the Apparel Export Promotion Council have said the deal will help Indian companies regain business from US retailers who had increasingly turned to alternative sourcing destinations such as Vietnam and Bangladesh. The reduced tariff structure is expected to improve India’s relative competitiveness and support a recovery in order flows over the coming quarters.

Zero-Tariff Pathway Through US Cotton and Raw Materials

A significant additional feature of the agreement is the provision for zero reciprocal tariffs on Indian textile and apparel exports if manufacturers use US-sourced cotton and certain other raw materials. Commerce Minister Piyush Goyal has clarified that this pathway is designed to create a mutually beneficial arrangement, supporting Indian exporters while also increasing demand for US agricultural exports.

This provision has gained importance following similar concessions granted to Bangladesh, which recently secured tariff-free access for certain apparel exports made using US materials. Indian industry leaders say the cotton-linked zero-tariff option could help level the playing field and provide Indian exporters with a strategic tool to further reduce duties and enhance competitiveness in the US market.

Broader Reset in India–US Trade Relations

Beyond textiles and apparel, the interim pact is part of a wider reset in India–US trade and economic relations. According to Reuters, India has ensured that around 90–95% of sensitive agricultural products have been kept out of the deal in order to protect domestic farmers. At the same time, India has agreed to reduce or eliminate tariffs on a wide range of US industrial and selected agricultural goods.

The framework also includes commitments to deepen cooperation in strategic areas such as defence, technology, critical minerals, digital trade, and supply chain resilience. Officials from both countries have described the agreement as a stepping stone toward a comprehensive Bilateral Trade Agreement, with the interim pact providing immediate relief while long-term negotiations continue.

Market Impact and Export Growth Outlook

The announcement of the deal has already had a visible impact on financial markets, with shares of major textile and apparel exporters rising on expectations of stronger earnings and improved order visibility. Analysts say the reduced tariff structure improves margin prospects and supports higher factory utilisation, which could lead to better capacity expansion and employment generation.

Government estimates suggest that the agreement could open up access to a large portion of the US’s $118 billion global textile and apparel import market. With the US already being India’s largest export destination for garments, exporters believe the deal could significantly boost shipments over the next few years and help reverse the recent slowdown in export growth.

Concerns and Political Reactions

While the apparel industry has broadly welcomed the deal, some trade unions and farmer groups have expressed concerns over the broader implications of the agreement. Protests have been reported in parts of the country, with critics warning about increased competition from US agricultural products and potential long-term impacts on domestic sectors.

The government has maintained that sensitive farm segments have been protected and that the agreement strikes a balance between export growth and domestic interests. Officials have also clarified that large figures cited in relation to future US imports are expressions of intent rather than binding commitments.

The MGMM Outlook

The interim India–US trade agreement has brought major relief to India’s apparel and textile industry after months of disruption caused by steep US tariffs. The new reciprocal tariff structure of 18% on most Indian goods, including textiles and apparel, marks a sharp reduction from earlier rates that had gone as high as 50% in some categories. This shift is expected to restore price competitiveness, improve order visibility, and rebuild confidence among US buyers who had slowed sourcing from India. Export hubs such as Tiruppur, Ludhiana, Surat, and Noida, which were hit by order cancellations and lower factory utilisation, are now positioned for gradual stabilisation and improved production planning.

The agreement also introduces a zero-tariff pathway for exports using US-sourced cotton and select raw materials, creating an additional tool for Indian exporters to further reduce duties and strengthen competitiveness, particularly against countries like Bangladesh and Vietnam. Beyond textiles, the framework reflects a broader reset in India–US trade ties, with cooperation expanding into areas such as technology, defence, digital trade, and supply chain resilience, while protecting most sensitive agricultural products. Market reactions suggest improved earnings prospects for exporters, and access to a larger share of the US’s massive apparel import market could support stronger export growth, higher capacity utilisation, and employment recovery in the coming quarters.

(Sources: Hindu BusinessLine, Business Standard, India Today)