India’s $190-billion textile and apparel industry is divided over the 10% Section 301 tariff imposed by the US on Indian goods over “forced labour” concerns. While some exporters fear the move could divert sourcing orders and create fresh uncertainty, others believe it will strengthen India’s competitive position against several rival manufacturing nations.
The latest US action follows investigations conducted by the Office of the US Trade Representative (USTR) into the enforcement of prohibitions on imports made using forced labour. While Washington lowered the proposed tariff on Indian goods to 10% from 12.5%, it also announced tariff-rate quota (TRQ) benefits for Bangladesh, Cambodia, Indonesia, and Malaysia, allowing specified textile and apparel exports from those countries to enter the US without the additional Section 301 duty. The TRQ benefit is not available to India.
Reacting to the development, the Confederation of Indian Textile Industry (CITI) cautioned that the tariff, unlike a temporary trade measure, carries no defined sunset clause and could pose reputational risks for Indian exporters. “The tariff imposition on the issue of forced labour is deeply unfortunate, as it does not indicate an expiry date and causes reputational risks, and CITI looks forward to the Indian government taking up this issue with the US, given the detrimental impact it could have on textile and apparel exports from India,” CITI Chairman Ashwin Chandran said.
India’s exclusion from the tariff-rate quota (TRQ) framework could put domestic exporters at a disadvantage, as competing suppliers from Bangladesh, Cambodia, Indonesia, and Malaysia will ship specified textile and apparel products to the US without the additional Section 301 tariff, potentially diverting sourcing orders away from India, he said.
Notably, the US is India’s largest export destination for textiles and apparel, with annual shipments typically valued at around $11 billion. Yet several industry leaders argued that the bigger concern is not the tariff but the uncertainty it creates for global buyers.
Vikas Singh Chauhan, Director of the Home Textile Welfare Association (HEWA), said frequent changes in US trade policy often prompt overseas buyers to postpone procurement decisions until there is greater clarity. “Orders either get put on hold or buyers move into a wait-and-watch mode. That uncertainty hurts exporters more than the tariff percentage itself,” he said. It disrupts production planning and order flows, he added.
Chauhan urged the government to expedite trade negotiations with Washington to prevent future tariff actions on Indian goods. He also called on the government to extend the Rebate of State and Central Taxes and Levies (RoSCTL) scheme, scheduled to expire on September 30, by at least one year. According to him, an extension would allow exporters to capitalise on Christmas season demand, improve production planning and secure export orders before any further changes in US tariff policy.
Industry opinion, however, remains divided over the implications of the latest US action.
Sanjay K. Jain, Chairman of the ICC National Textiles Committee and Managing Director of TT Ltd, described the announcement as a “modest positive” for India, highlighting that the effective tariff burden has been lowered from the previously proposed 12.5% to 10%. “It’s not an earth-shattering development, but India does gain at the margin,” Jain said, adding that the lower tariff is particularly meaningful for labour-intensive industries such as textiles and leather, where margins remain thin.
He said India’s relative position has improved, as competitors such as China and Vietnam continue to face higher tariff levels. Jain also suggested that India’s absence from the TRQ framework could be linked to the ongoing bilateral trade agreement (BTA) negotiations between New Delhi and Washington, under which market-access issues may eventually be addressed.
The Federation of Indian Export Organisations (FIEO) also expressed a relatively optimistic view, saying the impact of the additional 10% duty should be viewed in the context of competing countries’ tariff treatment rather than in isolation. FIEO President S.C. Ralhan said India has been placed in the lowest tariff bracket under the latest Section 301 action, giving it a relative advantage over several competing exporting nations facing higher duties. At the same time, he noted that many of India’s direct competitors in labour-intensive sectors, such as textiles and garments, continue to face the same 10% tariff, allowing Indian exporters to broadly retain their competitive positions.
The latest US action follows investigations conducted under Section 301 of the Office of the US Trade Representative (USTR) into the enforcement of prohibitions on imports produced using forced labour. CITI pointed out that India has recently strengthened its domestic legal framework through a Directorate General of Foreign Trade (DGFT) notification banning imports produced with forced labour, alongside the implementation of four Labour Codes aimed at strengthening workers’ rights.
Trade policy experts, however, believe the latest move signals a broader shift in US trade policy.
Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), said the reduction in the proposed tariff from 12.5% to 10% should not be interpreted as tariff relief because the temporary Section 122 tariff has effectively been replaced with a more durable Section 301 duty. According to Srivastava, a large share of India’s exports to the US, including engineering goods, textiles & garments, chemicals, machinery, plastics, leather, furniture, and gems and jewellery, will continue to attract an additional 10% duty over and above normal US tariffs. He also pointed out that India’s exclusion from the textile tariff-rate quota exemption framework extended to Bangladesh, Cambodia, Indonesia, and Malaysia.
Srivastava said the broader message is that higher US tariffs are increasingly becoming part of a long-term trade strategy rather than temporary trade actions. He cautioned that Indian exporters should prepare for a business environment where elevated US duties could remain in place for an extended period, with the possibility of further Section 301 tariffs on industrial products if ongoing US investigations lead to additional trade measures.
