A new analysis from Emkay Research suggests that Indian garment and textile manufacturers may struggle to fully capitalize on their seemingly advantageous position in Washington’s revised Section 301 tariff structure.
While New Delhi secured a 10% tariff rate, undercutting the 12.5% levy slapped on rivals China, Vietnam, Brazil, and Thailand, the brokerage warns this apparent edge is undermined by a critical gap which is that India was left out of tariff-rate quota (TRQ) carve-outs that several competitors now enjoy.
The TRQ Gap
Countries including Bangladesh, Cambodia, Indonesia, and Malaysia negotiated TRQ exemptions covering set volumes of textile and apparel goods made from American-sourced cotton.
Indian exporters have no equivalent relief, meaning they’ll pay the full 10% rate across the board while textiles or garment produced from US cotton from these competitor nations could enter the US market tariff-free.
Emkay frames this as a structural disadvantage that could erode India’s cost competitiveness in a sector where margins are already thin.
Outlook: Cautiously Stable, With Caveats
Emkay expects the new Section 301 tariff regime to leave India’s export momentum largely intact in the short run, with the lower comparative rate offering modest tailwinds versus regional peers.
That said, separate, ongoing Section 301 probes into overcapacity issues could eventually saddle India with fresh tariffs, potentially erasing its current positional advantage.
Much now hinges on the trajectory of the India-US bilateral trade negotiations, where locking in a lower duty rate and preferential market access remains a top priority for Indian trade officials.
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