Since August, US buyers have increasingly required Indian suppliers to absorb tariff costs.
Pushkar Mukewar, CEO and founder of trade finance firm Drip Capital, said the initial tariff hike in April 2025 had limited impact, as US buyers and importers absorbed part of the cost.
“The real impact came when tariffs were raised to 50 per cent in August,” he said, adding that Indian exporters were forced to shoulder more of the burden, making them less price-competitive globally.
In response, many US clients shifted to placing smaller, short-term orders instead of large seasonal commitments, keeping volumes subdued, traders said.
Smaller exporters without sufficient access to credit or overseas diversification shut operations altogether, while others cut staff or closed production lines.
India’s textile hub of Tiruppur in Tamil Nadu was among the worst hit, with several garment units shutting down or scaling back sharply, according to exporters and local reports.
The US previously accounted for about US$2 billion to US$3 billion of Tiruppur’s exports, but this has fallen to “only a few hundred million dollars”, said Sharma of Fashionza.
Exporters warned that prolonged US tariffs risked lasting damage. “If the 50 per cent tariffs had continued, buyers would have developed alternate countries in their supply chain, and once they develop, it is always difficult to come back,” said Agarwal of Norex Flavours.
In some cases, that shift had already begun. Buyers – especially in textiles – began sourcing from countries such as Vietnam, Bangladesh and China, where tariffs were lower than on Indian goods.
Kumar said this was most evident among US buyers facing tight deadlines, who were “not willing to take a loss to support their Indian supplier”.
Exporters in China face US tariffs of about 47 per cent, while Vietnam and Bangladesh are subject to tariffs of about 20 per cent.
Many exporters told CNA they narrowly avoided a more permanent loss of US customers after Trump announced this week a cut in tariffs on Indian goods from 50 per cent to 18 per cent.
WHY THE US MARKET MATTERS
Despite the recent rollercoaster, the US remains irreplaceable for Indian exporters, industry experts and traders said. It is India’s largest trading partner, accounting for about 18 per cent of India’s total goods exports, according to the International Trade Council.
Traders described the US as the easiest major market to operate in, citing well-informed buyers, faster decision-making, bulk orders, and lower customer acquisition costs compared with fragmented markets such as the European Union (EU).
“Exports are a relationship business,” said Sharma of Fashionza, noting that long-standing US partnerships were paused, not dismantled, during the tariff shock.
He said he spoke to about five or six US customers immediately after Trump announced the tariff cuts, adding that they “were happy and started discussing India sourcing again”.
Exporters told CNA that US clients have reopened discussions on resuming larger orders, though most are waiting for formal confirmation and fine print before committing.
Several industry executives expect supply chains to return to pre-April 2025 US-India trade levels within weeks once a deal is finalised.
Details are expected to be clarified in a joint statement in the coming days, as the US-India trade deal is still being negotiated, India’s Minister of Commerce and Industry Piyush Goyal said on Feb 3.
By contrast, the EU represents a slower but strategically important long-term opportunity.
While the EU-India trade agreement announced on Jan 27 was well received, exporters cautioned that it could take six months to a year to translate into actual orders, given the need for EU parliamentary approval, regulatory compliance, and the bloc’s country-by-country complexity.
Finalised after 18 years of negotiations, the landmark free-trade pact will sharply cut or eliminate tariffs on most goods traded between India and the EU, improve market access, open up services sectors, and strengthen regulatory cooperation.
Under the deal, Indian exports such as textiles, leather, footwear, marine products, gems and jewellery, chemicals, plastics, and various manufactured goods are set to benefit from significant tariff reductions, while the EU will gain lower duties on automobiles, machinery, wines and spirits, chemicals, pharmaceuticals and select agricultural products.
According to Gupta of Loomkaari, the unique rules, languages, and buyer preferences of each EU country make achieving scale more challenging than in the US.
Consumer preferences differ too, she added.
“What sells easily in the US won’t necessarily appeal to a European customer,” Gupta said, noting that building a customer base there requires time and sustained effort.
For instance, US customers tend to prefer linen fabrics and neutral tones, while European buyers favour cotton, brighter colours and sustainable, eco-friendly products, with less emphasis on price.
“Since the US is an easy market, every Indian exporter wants to sell there,” she said.
“But with the EU-India trade deal, it opens up a much bigger market for Indian exporters.”
Like Gupta, many Indian exporters now see diversification as unavoidable.
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