50% tariff shock: US companies suspend buying clothes from India

Several US companies have suspended orders for ready-made garments from India following the US's announcement of a new 50% counter-tariff. Many buyers are also planning to shift production to countries with lower tariffs. This has raised fears that the Indian garment sector is going to face a major crisis.

On Friday (August 8), Turkey's TRT World reported, citing Reuters, that Pearl Global, a supplier to US brands such as Gap and Cole's, said that since the tariff announcement, buyers have been calling to ask about increased costs and production relocation. The company also has factories in Bangladesh, Indonesia, Vietnam and Guatemala.

According to the US decision, a total of 50% tariffs will be imposed on Indian products - 25% of which came into effect on August 7, and the remaining 25% will be effective on August 28. In comparison, the US market is facing a 20 percent tariff on garments from Vietnam and Bangladesh and a 30 percent tariff on garments from China.

Richaco Exports of India exported $113 million worth of garments to the US this year. The company’s general manager, Dinesh Raheja, said the company is planning to set up a new manufacturing facility in Kathmandu, Nepal, to cope with the pressure from tariffs. Meanwhile, top manufacturer Raymond is considering expanding production in Ethiopia, where the US tariff is just 10 percent.

Tiruppur in Tamil Nadu—India’s knitwear capital—has also been hit by the order freeze. Naveen Michael John, executive director of Cotton Blossom India, said some buyers are urging them to ship as much as possible before the tariffs fully take effect. But a 50 percent tariff would make everything from $1 clothing to $5 T-shirts more expensive in the US market.