India is intensifying its efforts to prevent a proposed tariff increase by the United States that could have a detrimental effect on its apparel exports. Advocated by US President Donald Trump, this tariff hike is scheduled to take effect on April 2 and may impose duties of at least 30 percent on Indian garments entering US ports.
Currently, the US applies import duties ranging from 7 percent to 16.5 percent on different garment categories based on specific HSN codes. In contrast, India applies a basic customs duty of 20 percent along with a 10 percent social welfare surcharge on imported garments.
The Apparel Export Promotion Council (AEPC) of India is collaborating closely with the government to devise a strategy aimed at maximizing apparel exports to the US. The AEPC has provided a comprehensive analysis to the government to highlight the differences in tariffs between the two nations. Earlier this month, the AEPC also sent a letter to the Ministry of Textiles addressing these concerns.
Both the export promotion council and other industry stakeholders are advocating for a ‘zero for zero’ duty policy on textiles and apparel. They argue that reducing Indian duties on textile products to zero percent would compel the US to reciprocate with similar tariff rates on Indian exports. The industry believes that such measures could enhance India’s market share within the US, the world’s largest economy.
Detailed discussions are being held in New Delhi between US Assistant Trade Representative Brendan Lynch and Rajesh Agrawal, India’s Additional Secretary at the Ministry of Commerce, to formulate a mutually beneficial plan for adjusting tariffs. The US is pressing India to lower high tariff barriers on American goods while showing willingness to consider solutions like quota restrictions to address concerns raised by India’s farmers and small industries.
There is hope for both nations to come to an agreement on trade. However, if a consensus is not reached, the US may raise tariffs to align with India’s rates. Presently, India imposes a 20 percent customs duty along with a 10 percent social welfare surcharge. The AEPC has pointed out that the Integrated Goods and Services Tax (IGST) should also be factored into India’s overall tariff structure. When included, the total tariff could fall between 35 percent and 42 percent, as a 5 percent IGST applies to garments priced below ₹1,000 per piece, while those exceeding this value face a 12 percent IGST.
The US determines its tariffs as a percentage of value based on its most favored nation (MFN) rates. For instance, it enforces tariffs ranging from 5.5 percent to 11.80 percent on women’s cotton dresses (HSN code 620442), with Indian exports facing an average MFN tariff of 8.57 percent for this category. Additionally, certain US states impose local sales taxes based on their tax policies, while others may not impose any sales tax or GST. It is hoped that reciprocity will be limited to duties applicable at ports.
AEPC Chairman Sudhir Sekhri has called on the government to turn this looming challenge into a chance by negotiating zero tariffs for apparel exports, as Indian garments could face up to 30% tariff in US under the new regime if no agreements are reached.
