US Tariffs & Trade: Will the UK FTA Help India’s Textile Industry Bounce Back?

The textile industry in India is beset with severe turbulence with the Annual shipments to the U.S. border on $10.7 billion and some estimates have set these exports tumbling down by as high as 40% with high tariffs lapping out cost advantages further.

The picture becomes alarming since textiles contribute 2.3% to the GDP constitute 13% of industrial output and 12% of all exports. Over 45 million people work in this sector many in rural areas. The very next question is whether the new trade agreements signed by India and its policy interventions could alleviate the severity of the situation.

What is the Comprehensive Economic & Trade Agreement (CETA)?

The CETA stands for the India–UK trade pact signed in July and expected to be operational by early 2026. Under this agreement, the UK will progressively eliminate tariffs on labor-intensive Indian exports and granting Indian goods tariff-free access to the British market move is deemed vital in reducing the impact of U.S. tariff shock.

What is U.S. Tariff Tide?

Opening reciprocal tariffs across the board, the U.S. slapped high duties on Indian textiles almost 28-33% of India's textile exports were previously enjoyed by the U.S. Exporters are expecting volumes to reduce drastically and margin compression under the new tariff regime while tariffs being imposed may remain relatively more on India as compared to a few other economies and what makes the importance of the American market is that any softness in the American market resonates through the supply chain and employment.

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What is India–UK Free Trade Agreement (FTA)?

The India-UK FTA provides for zero tariffs on most categories of Indian garments and home textile import tariffs were set at somewhere between 8-12%. An increase of 30-40% on Indian exports is expected as the FTA restructures trade flows from loss-making or tariff-impeded routes. The inductions afforded through the India-Japan CEPA wherein relaxation of tariffs is not an assurance of market gains Indian exporters still have to fulfil buyers expectations in respect of quality, speed and reliability.

What is the actual Diversion in Action?

• In order to mitigate the damage of U.S. tariffs, India is seeking alternative routes for:
• Focusing on U.K. and EU markets through trade agreements
• Moving into cotton yarn, fabrics and non-garment textile segments
• Expanding outreach to emerging markets in 40 countries to offset growing export loss

Alongside this, CareEdge analysts are projecting a decline of 9-10% for export volumes per clever diversion and policy support shall limit more grievous damage.

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How Regional Growth Hubs Firing Up?

Textiles in India are manufactured in a very tightly knit manner in Tamil Nadu, which is rated at 27% of share followed by Gujarat with 19% and Maharashtra with 13%. Towns like Tiruppur, Coimbatore, Erode and Surat are known seasoned exporters with a focus on skilled labor and supporting infrastructure with the UK opening up under an FTA, these centers stand a reasonable chance of growing, albeit on the basis that quality, sustainability and responsiveness are rated highly.

How FTA Enhanced Growth Starts Beyond Textiles?

The FTA are not limited to apparel in the traditional sense rather it opens areas for man-made fibre (MMF) segments, technical textiles and value-added home textile products since Indian supply chains operate across various segments advances in one category may lift the economies of scale for the others.

What are Strategic Implications for the Indian Market?

• Export stabilization in the U.K. may take up a part of the volume lost in the U.S. and thus maintain deliverable foreign exchange.
• Supplier realignment may be a movement toward MMF, technical textiles and higher-margin lines.
• Revitalization of the industry with a greater urgency will come the need for investment in infrastructure, technology and cluster support.
• Policy coherence in the face of global volatility, decisions must rest on data while incentives must be specific to the nature of the challenge.

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Disclaimer: This article is for informational purposes only. Trade statistics and projections are subject to change with policy updates and market conditions.