US Tariffs Impact
The imposition of tariffs by the United States has critically damaged India's textile exports, with significant repercussions for the industry. A 25% tariff,
along with an additional 25% penalty on oil-related imports, has resulted in order cancellations or withholding by US buyers. The letter, which was dated January 10th, stated that the tariffs have nearly erased profits, thus depleting financial reserves for numerous textile businesses. The US market, which constitutes approximately 70% of exports for several large Indian textile exporters, is now a site of economic vulnerability. The Apparel Export Promotion Council has also declared that even when offering discounts of 25%, tariff absorption is commercially infeasible. Transferring these costs to buyers is also not sustainable. This situation endangers numerous jobs and jeopardizes market share, necessitating urgent solutions to avoid lasting damage to the strategic export sector.
Industry's Plea for Help
The Apparel Export Promotion Council has implored the Indian government to intervene immediately due to the severe consequences of the US tariffs. In a letter addressed to Vice-President CP Radhakrishnan, the Chairman of the Council, A Sakthivel, emphasized the necessity of prompt action and support for the apparel garment industry. The Council has requested immediate intervention, stating that any delay would result in production cutbacks and factory shutdowns, reflecting the critical nature of the situation. The textile industry has already absorbed substantial losses to safeguard exports and employment, but it lacks the capacity to withstand further economic strain. The council has recommended concluding the India-US trade treaty to provide immediate relief and long-term stability. The situation is dire, with potential damage to the sector if a resolution is not achieved in the next 3 to 6 months.
Financial Strain
Textile exports operate on razor-thin margins, providing no room for absorbing significant tariff shocks. The imposed US tariffs have wiped out profits for many businesses, contributing to the depletion of their financial reserves. The Apparel Export Promotion Council has highlighted that even with a 25% discount, it is commercially unviable to absorb further tariffs. Furthermore, passing these costs onto buyers is equally unfeasible. The Council's report indicates the severity of the situation. The sector's financial instability stems from the inability to adjust to the high tariffs that will potentially disrupt the production. This is causing significant distress within the industry. The council's recommendation to end the India-US trade treaty is a direct response to this financial burden.
Potential Consequences
Without an immediate resolution, the Indian textile sector faces serious repercussions. The potential for order stoppages, job losses, and a permanent loss of market share looms large. The textile industry, already strained by the economic challenges, cannot withstand further pressure. Any delay in addressing the issue carries a high risk of causing irreparable damage to a critical export sector. The industry has repeatedly absorbed losses in an effort to maintain exports and preserve employment. The immediate concerns include production cutbacks and factory closures, highlighting the urgency of government intervention. This is why the council has requested the immediate conclusion of the India-US trade treaty. The situation demands swift action to mitigate the adverse impacts and safeguard the industry's future.
