Tariffs hit Karnataka textile sector hard, hopes pinned on trade talks

The state is also a key producer of essential raw materials, contributing roughly 49 per cent of India’s silk and wool, 6 per cent of its cotton, 5 per cent of Man-made Fibres (MMF), and 10 per cent of the nation’s total fabric output, as per some estimation, while Bengaluru, the state’s capital, is widely referred to as the ‘garment capital’ of the country.

However, like the other manufacturing hubs across India, Karnataka is facing mounting challenges due to the United States’ imposition of 50 per cent reciprocal tariff on Indian goods.

This has disrupted trade and triggered widespread concern within the state’s apparel and garment sector, which is also one of the largest employment generators.

Industry insiders say exports to the US — a key market — have nearly come to a halt, forcing many factories to operate well below capacity, and if the situation persists, large-scale layoffs and factory shutdowns cannot be ruled out.

While some relief has come in the form of cotton duty waiver and other policy support, these measures are not sufficient to offset the impact of 50 per cent tariffs, even as they underline that the industry’s survival will now depend largely on how swiftly market diversification takes place, implementation of stronger trade policies, and tapping into domestic consumption to bridge the gap.

A glimmer of hope nonetheless has emerged with the resumption of high-level discussions between India and the United States. The discussion marks a positive shift following the prolonged diplomatic strain after US President Donald Trump imposed additional tariffs in response to India’s energy trade with Russia.

The recent discussion signals a thaw in the mutual relations and offers an opportunity to recalibrate the trade dynamics between the two countries.

In the talks, the US delegation was led by Brendan Lynch, US Trade Representative for South Asia, while India was represented by the senior Commerce Ministry official Rajesh Agarwal. The dialogue is being seen as a major step towards de-escalating trade tensions. Adding to the optimism is President Donald Trump’s recent expression of hope about securing a comprehensive trade agreement with India, which was met with an equally positive response from Prime Minister Narendra Modi, who highlighted that such negotiations could unlock the vast untapped potential of the India-US partnership.

This mutual show of intent has bolstered the industry’s spirit, which sees it as a sign towards an early resolution, which will help stabilize the sector and revive its growth momentum.

However, others are for a more cautious approach. Their apprehensions stem from some recent media reports, which, citing sources, reportedly claimed that, although Brendan Lynch and Rajesh Agarwal held “positive and forward-looking” discussions aimed at reviving the bilateral trade agreement (BTA) negotiations, the next formal round of negotiations will begin subject to the outcome of virtual interactions to address certain contentious issues.

It would therefore be prudent to acknowledge the prevailing uncertainty as all eyes are now on how things unfold in the coming days.

ALCHEMPro News Desk (DR)