5 min readNew DelhiJul 24, 2026 05:05 PM IST
As the US imposed fresh tariffs of 10% on India after a Section 301 investigation into imports of products manufactured through forced labour, Indian exporters said that India is better positioned than most of its competitors, particularly China and Vietnam. But Indian textile exporters said that due to new textile tariff-rate quotas (TRQs) for Bangladesh, Cambodia, Indonesia, and Malaysia, based on their imports of US cotton, sourcing of cotton, yarn and other intermediate goods from India could be reduced.
The Federation of Indian Export Organisations (FIEO) said that the additional 10% tariffs under Section 301 imposed by the US on imports from India will increase the landed cost of Indian products. Still, India is facing lower tariffs than competitors in labour-intensive sectors such as textiles, garments, leather and footwear, exporters said.
SC Ralhan, President, FIEO, said that India has not been singled out under the new US measure.
“The fact that India has been placed in the lower 10% tariff category, while several competing exporting nations including China, Vietnam, Thailand, Türkiye, UAE, Brazil, South Africa and others face a higher tariff of 12.5%, reflects the recognition by the US of the policy measures taken by the government to strengthen its framework relating to forced labour. This has helped India secure a relatively favourable position compared to many of its global competitors,” he said.
Ralhan further said that many of India’s direct competitors in labour-intensive sectors such as textiles, garments, leather and footwear — including Bangladesh, Cambodia, Pakistan, Sri Lanka, Indonesia and Malaysia — have also been subjected to the same 10% tariff.
Consequently, Indian exporters largely retain their relative competitiveness in these sectors, as competing suppliers will face a similar duty incidence in the US market.
“More importantly, Indian exporters could benefit from trade diversion in several product segments where competing countries are subject to the higher 12.5% tariff. Even a differential of 2.5% can influence sourcing decisions in highly competitive markets, particularly where Indian exporters can offer quality products, reliable deliveries and stable supply chains,” he added.
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Textile challenge
The USTR has established textile tariff-rate quotas (TRQs) for Bangladesh, Cambodia, Indonesia, and Malaysia under which these economies would import US cotton and textile goods for final manufacturing. No such TRQ has been announced for India.
Bangladesh, being one of India’s top competitors and also a large importer of Indian cotton and fibre, could now begin sourcing input items from the US, as USTR said that the TRQs will allow a specific volume of textiles and apparel from Bangladesh, Cambodia, Indonesia, and Malaysia to enter the United States free of Section 301 tariffs. These TRQs will have an initial duration of three years, and imports to the US would then begin attracting a 10% Section 301 tariff.
CITI Chairman Ashwin Chandran said that the tariff imposition on the issue of forced labour is unfortunate as it does not indicate an expiry date, causing reputational risks, and CITI looks forward to the Indian government taking up this issue with the US given the detrimental impact it could have on textile and apparel exports from India.
“What could raise a serious challenge for Indian textile and apparel exporters is the fact that although many key competitors of ours have also been subject to the same tariff rate, a window has been opened for textile and apparel exports from these countries to enter the United States free of the Section 301 tariffs. This differential treatment risks diverting sourcing orders for textile and apparel items away from India,” Chandran said.
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Chandran said the US tariff imposed on India on the issue of “forced labour” could also affect exports of intermediate textile items from India to other nations. The US is the single-largest market for India’s textile and apparel items. Exports of textile and apparel products from India to the US are usually close to $11 billion.
‘Broader country-level US policy’
FIEO said that the measure is not a finding against Indian exporters or Indian products, but forms part of a broader country-level US policy applicable to a large number of economies. Several important product categories, including steel, aluminium, auto components, pharmaceuticals, pharmaceutical ingredients, certain agricultural products already covered under Section 232 measures, continue to enjoy exclusions, thereby reducing the impact on several export sectors.
FIEO, however, advised exporters not to draw broad conclusions based solely on the additional 10% tariff but to undertake a product-wise assessment of the applicable US tariff, available exclusions and the tariff treatment of competing supplier countries. Exporters should also strengthen supply-chain compliance, enhance productivity and continue investing in quality, innovation and value addition to leverage emerging opportunities.
