Industry optimistic as Trump hints at tariff relief for India
Even as US-India trade talks are heating up ahead of the August 1 deadline and a lot is at stake, US President Donald Trump on Tuesday said India is working on a trade deal on the same lines as the one he recently struck with Indonesia.
"India is basically working on the same lines," Trump said while speaking to reporters in Washington on Tuesday, hinting at the possibility that India could be given similar trade terms as Indonesia.
According to Donald Trump, under the new deal with Jakarta, Indonesia will face a 19 per cent tariff on imports to the US, but there will be no tariff on exports from the US to Indonesia.
And as news of this announcement spreads in the industry, it highlights what such a deal could mean for India's key export sectors, especially the apparel industry, which considers the United States as its key apparel export destination.
“President Trump has hinted at a potential India-US trade deal on the lines of the recent Indonesia deal (where a 19 per cent tariff is applicable on exports), which could ultimately give Indian exporters a more level playing field in the lucrative US apparel market,” underlined Kishan Daga, founder of consulting services provider Concepts N Strategies, speaking to Fibre2Fashion. He also added that a tariff reduction to below 20 per cent could open “more doors” for Indian exporters, especially in the athleisure and MMF-heavy segments where India is ramping up production.
Daga claimed that such a change would also support India's vision of becoming a reliable global supplier in technical textiles and functional apparel, while Sabhari Girish, chief sustainability officer, Sulochana Cotton Spinning Mills (Tirupur), on his part said: "If we have to pay a 19 per cent tariff like Indonesia, it is undoubtedly a very positive development; and it also indicates how hard we negotiated the tariff to maintain our competitiveness."
Meanwhile, N Thirukkumaran, chairman of Tiruppur-based Essti Exports India Pvt Ltd, said, "India will definitely have a competitive advantage over many of its competitors. However, there will be a caveat to this—the new tariff will be in addition to the existing duties that Indian apparel exporters are already paying on shipments to the US, which may reduce the overall profit to some extent even if the new tariff rate is set at 19 per cent."
However, he remained optimistic and said that India could negotiate hard to reduce tariffs below 19 per cent in the interim agreement—a move that, if successful, could be a game-changer for the industry.
It is worth mentioning here that with discussions focused on expanding market access and negotiating tariff reductions on goods worth an estimated $150 billion to $200 billion in bilateral trade, it is clear that both countries see the potential to gain even more economic value. This sentiment has also been echoed in several recent media reports that India and the US aim to increase bilateral trade to $500 billion by 2030. This figure would be a significant leap and a transformational moment in their strategic and economic partnership.
But this optimistic estimate hinges on the successful conclusion of an equitable and mutually beneficial trade agreement.
The mini-trade deal was initiated when Trump first announced his intention to impose additional tariffs on several countries with which the US has a trade deficit. India was prominently included in this list as it has a huge export surplus compared to the US. India exports goods worth around $77 billion to the US annually while imports are only around $42 billion. Thus, this trade surplus has long been a bone of contention for the Trump administration. The Trump administration has repeatedly demanded more equitable terms of trade and better access for US goods and services to the Indian market.
If one recalls, in February, Prime Minister Narendra Modi and President Trump had announced during Modi's two-day visit to the US that the 'first tranche' of a major bilateral trade deal would be announced by the autumn of 2025. This had raised hopes in both countries that years of stalled negotiations, misunderstandings and tariff disputes would finally start yielding concrete results.
Now, while we await the formal signing and announcement of the deal, which will determine how much tariff India will pay on its exports to the US, there is excitement in the Indian apparel industry in anticipation of a 19 per cent tariff, which is expected to give Indian apparel exporters an edge in the crucial US market.
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