Indian textile exporters are turning to Europe to offset steep losses in the U.S. market after Washington imposed tariffs of up to 50 percent on a wide range of apparel and home textile products in August. The move — part of a broader trade review targeting major manufacturing economies — has forced exporters to seek alternative buyers and reconsider production footprints.
The European Union, already India’s largest trading partner with goods trade of around $137 billion in the year to March 2024, has become the main fallback. Exporters are investing in compliance systems for labelling, traceability, and chemical restrictions, hoping to secure a larger foothold in the EU and UK markets.
“We are cutting prices to maintain long-term U.S. relationships while pivoting new business development toward Europe,” said Rahul Mehta, chief mentor of the Clothing Manufacturers Association of India, in comments to Reuters. “Margins are severely hit, but walking away from key customers is not an option.”
Large exporters such as Gokaldas Exports — which earns roughly three-quarters of its revenue from the U.S. — are stepping up European shipments and expanding production in Kenya and Ethiopia to reduce tariff exposure. “Africa offers tariff-free access to both the U.S. and Europe,” the company’s management told Reuters last month. “We expect our African operations to double over the next two years.”
Smaller manufacturers are less insulated. A survey by the Confederation of Indian Textile Industry found that about one-third of exporters have seen turnover drop by nearly half since July, as buyers delayed or cancelled orders. Ludhiana’s knitwear cluster — a key hub for winter apparel — has also faced setbacks, with several European buyers reworking contract terms after Indian shipments were redirected from the U.S. market.
To cushion the blow, New Delhi has extended duty-free cotton imports until December 2025 and is considering targeted export incentives. However, exporters warn that temporary relief measures will not offset structural cost disadvantages. Sustained discounting, they say, will erode profit margins and risk a further round of job cuts in key textile hubs such as Tiruppur, Surat, and Panipat.
Some businesses are exploring the use of third-country routes to maintain access to U.S. customers, though trade experts caution that transshipment could invite penalties under U.S. rules of origin. “Routing through Bangladesh or Sri Lanka without sufficient value addition is risky,” said a Delhi-based trade consultant quoted by Moneycontrol. “U.S. authorities are watching for circumvention.”
The government’s medium-term strategy is expected to hinge on two levers: accelerating the India–EU trade agreement and providing financing support for exporters adapting to new compliance regimes. Both could take months to materialise.
For now, the textile sector — which employs over 45 million people and accounts for nearly 10 percent of India’s merchandise exports — is facing its most difficult period in years. The speed at which exporters can diversify markets without sacrificing competitiveness will determine whether this shock becomes a temporary setback or a structural reordering of India’s export base.
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