China, India, Bangladesh or Vietnam - who may benefit the most from tariffs imposed by Trump on textiles
By yash chouhan 2025-02-25 14:44:43
Who might gain the most from Trump's textile tariffs—China, India, Bangladesh, or Vietnam?
Indian textile exporters see the current tariff war as an opportunity to gain more market share from China, the world's largest textile and apparel exporter. If the reciprocal tariffs imposed by Trump are implemented, it may help India bridge some gap with China.
"There is a demand for Indian apparels. We will be able to gain share in China's trade, as it is facing severe tariff pressure from the US," Sudhir Sekhri, chairman of the Apparel Export Promotion Council (AEPC) under India's textiles ministry, said on February 18. You can watch the full conversation here:
Not just India, Vietnam and Bangladesh are also trying to make more and more space in the US market at the expense of China. "The textile and apparel sector has a complex supply chain. No country can meet the demand of another country," said Prerna Jhunjhunwala of Elara Capital, indicating that imposing reciprocal tariffs would be easier said than done.
Vietnam is the world's third-largest textile exporter after China and Bangladesh .
Vietnam is set to overtake China to become the largest textile exporter to the US in the first five months of 2024. On the other hand, the US is the third-largest customer of Bangladesh, the world's second-largest apparel exporter. Based on tariff differences alone, Vietnam may be the least impacted compared to India and Bangladesh.
This means that when the US imposes its proposed tariffs on reciprocal tariffs, the price of Indian and Bangladeshi textile products exported to the United States will increase due to the tariff hike.
As per Indian government data, at least 28% of India's textile and apparel exports go to the US. However, there are considerable variations in tariff rates. According to AEPC, cotton fabric, which accounts for 65% of total exports to the US, attracts a lower duty, while man-made fabrics such as polyester, nylon, acrylic and rayon attract a 33% tariff.
The tariff differential in fabric is around 15.6%. But when you cover only apparel, the tariff differential is around 7%. "Import duties on Indian textiles range from 2.6% to 33%," Sekhri pointed out.
According to a new report by Prabhudas Lilladher, India's textile exports operate within a low tariff differential even if tariffs rise to 15% to 20%. "India's exports are supported by a highly diversified export base," the report said. Meanwhile, 70% of textile and apparel exports to Vietnam and Bangladesh comprise readymade garments, which are likely to face higher tariffs in the coming months. However, there is still no clarity from the Trump administration on whether the reciprocal tariffs will be on particular categories of products or on the entire sector. However, tariffs have always been one of the many determinants of trade. These three countries continue to have other strengths such as low cost of production, price competitiveness and cheap labour cost. Based on their long-established strengths, these countries are trying to get a share of the larger share of trade in the US market. Divya Srinivasan, research associate at the Centre for Social and Economic Progress, said India needs to reduce its tariffs to encourage textile manufacturers, project itself as an alternative supply chain hub and mitigate the impact of reciprocal tariffs and grab China's export share to the US.
Trump's tariffs will have an impact on India, but it may be less than on Vietnam and Bangladesh. This is because textiles and apparel form a large part of the latter two economies, and the US is a major buyer.
The textile industry accounts for about 11% of Bangladesh's economy and about 15% of Vietnam's economy. In contrast, India's textile sector contributes 2.3% to GDP, reflecting diversity within the fifth-largest economy.
