Indian Apparel Exporters Diversify Markets After US Tariff Shock

Indian garment manufacturers are reconfiguring their export destinations and reducing their exposure to the United States following a significant tariff shock that saw duties rise to as much as 50 per cent last year. While US duties on Indian products currently stand at 10 per cent under Section 301, alongside base tariffs ranging from 6 per cent to 12 per cent, the initial disruption has driven businesses to seek alternative markets.

Orient Craft, a major apparel exporter, has sharply cut its shipments to the US after facing order cancellations and demands from buyers to absorb a 25 per cent portion of the duty, despite manufacturing margins remaining below 10 per cent. Founder Sudhir Dhingra stated that the US now accounts for less than 10 per cent of the company's sales, down from 84 per cent previously, with annual exports standing at roughly ₹150 crore. The firm has successfully redirected its sales toward Britain, Europe, and domestic buyers.

Similarly, Gokaldas Exports, one of India's largest garment exporters employing over 53,000 people, is actively turning toward Europe. Managing Director Sivaramkrishnan Ganapathi noted that this shift is permanent. The company plans to increase Europe's revenue share from 15 to 16 per cent up to 25 to 30 per cent over the next three to five years, while simultaneously reducing the US share from 50 to 55 per cent down to 35 to 40 per cent.

Data from the Global Trade Research Institute indicates that between April and August, India’s textile, apparel, and home-furnishings exports to the US fell 9.8 per cent to $4.0 billion. Conversely, shipments to other international markets rose 3.7 per cent to $15.2 billion. Industry estimates show the US share of Indian exports declined to 25.4 per cent at the end of August, compared to 28.3 per cent in 2022.

Exporters point out that tariff uncertainty, high shipping costs, and margin pressures from US buyers have made regions like the UAE, UK, and European Union more attractive. Furthermore, Indian clothing benefits from duty-free access to Britain under the India-UK trade deal enacted in July, with a potential EU agreement expected to eliminate existing duties of 12 per cent to 17 per cent. Key European targets include Germany, France, Italy, and the Netherlands, according to A Sakthivel, Chairman of the Apparel Export Promotion Council.

In tandem with market diversification, manufacturers are working to lower production costs. Companies are expanding operations into regions like Ranchi in Jharkhand, which offers subsidies, land access, and a reliable workforce. Gokaldas currently operates two factories in Ranchi and plans to open a third, creating up to 4,600 jobs, supported by an estimated 10 per cent efficiency advantage over other locations.

India's domestic apparel market, valued at $150 billion and growing at 7 to 8 per cent annually, also provides a stable buffer against export volatility. While exporters emphasize they will not completely abandon the US market given its size and longstanding relationships, the recent upheaval ensures it will no longer hold its former dominance.

"This strategic pivot by Indian garment exporters highlights the critical business necessity of supply chain and market diversification. Relying too heavily on a single geographic market exposes businesses to sudden regulatory and tariff shocks that can severely compress margins. By expanding into Europe, the UK, and strengthening domestic sales, these manufacturers are building long-term operational resilience. For the broader entrepreneurial ecosystem, this serves as a reminder that robust risk management and adaptability are just as important as top-line growth." — Dr. Shishir Gupta, Founder & CEO, StartupLanes