On March 19, 2025, Jerome Powell, Chair of the United States’ Federal Reserve indicated tariffs have partly played its role with the elevated inflation situation. Given the headline inflation is at 2.8%, federal interest rate remains at 4.25-4.5%, which will influence consumer spending. Surveys indicate consumer confidence is down, which in turn will affect the buying of non-essential items as these depend on discretionary spending. Speaking about tariffs, Powell stated “they tend to bring growth down, they tend to bring inflation up.”
On March 20, 2025, Bank of England also chose to maintain the current interest rate at 4.5% while its domestic economy is weak. Again, the global economic uncertainty due to tariff situations has weighed heavily to maintain the current interest rate.
United States, China, India are countries with sizeable middle-class population have interests in textiles as they engage in exporting and importing fibers and textiles. United States is the largest market for consumer goods and its economy matters for global trade. While the United States’ economy is on a strong footing, the growth this year will be slightly less than expected at 1.7 percent. According to Chair Powell, the growth in the next two years will be slightly less than 2 percent.
The tariff situation, consumers’ spending power and more importantly confidence will determine the amount of trade in textiles and apparels. As textile manufacturing is labor intensive with less margins, the tariffs are not at a level to shift the manufacturing of commodity textiles to the United States. Developed economies like United States and EU are poised to grow its advanced textiles sector. More importantly, with EU countries committing to spending more on their defense budget, opportunities in defense, healthcare, and industrial textiles will grow and may support new investments.
What will be the textiles sector’s landscape in the tariff scenario?
Trade between China and United States will see some change. China’s export to the United States will take a hit. Other countries like Bangladesh, Vietnam, India, and Indonesia may see a bump up in exports of apparels. However, industries with Chinese investments in Vietnam and low wage countries would see export enhancements. China’s importing of United States’ cotton will show a decreasing trend, which is already happening due to its weak domestic consumption. But this can be offset by exporting to other major textiles and apparel manufacturing nations. How much the shift will be is difficult to predict at this uncertain time.
India is currently in the fourth position as an exporter of apparels to the United States. It is unlikely to see a sudden shift in its ranking, but its share of exports will increase. According to United States’ Office of Textiles and Apparels, in 2024, India exported about US$ 4.69 billions worth of apparels, while Bangladesh exported about US$7.34 billion.
Bangladesh, Vietnam, and Indonesia being an importer of cotton will have constraints in exponentially increasing its manufacturing, but their appetite for cotton will grow. India is poised to enhance its apparels exports to the United States.
India needs to increase its cotton availability with improving its productivity. This crop year (October 2024- September 2025), the production will be about 30 million bales (170 Kgs each) which is less than last year’s production. This scenario opens opportunity for cotton exporting countries to trade with India while India maintains a 11% tariff of imported upland cottons. At the present times, mills are showing interest in procuring cotton from Brazil which comes out to be competitive in terms of prize. United States’ cotton sector needs to promote its cotton for its quality, timely delivery and after sales support although it is relatively highly priced against Brazilian cotton.
I had an opportunity to discuss cotton trade dynamics with Velmurugan Shanmugam, general manager of India-based Jayalakshmi Textiles which has recently bought Brazilian cotton for using it as a blend with Indian cotton. According to Shanmugam, balancing the cost and quality of imported cotton is a critical activity while making decisions on purchasing imported cotton. While Brazilian cotton comes out to be economical, United States cotton is still better in terms of nep counts stated Velmurugan Shanmugam.
Given the reciprocity tariff policy taking effect on April 2nd, textile trade with India will not be affected much as India’s basic custom duty on knitted products is 20% and normally apparels’ tariff differential is about 7%. India will be competitive against China as United States has imposed 20% additional tariff over the existing ones making its expensive from this point of view.
Indian industry should utilize the opportunity to enhance its productivity and strengthen its cotton and synthetic base. Importantly, the apparel and garment sectors should increase the size of their product basket.
While it is difficult to predict what would be loss in export share of China to the United States, given the amount of export it has been doing in recent years, certainly other South Asian countries will benefit. This in turn provides opportunities for cotton exporting countries like the United States to realign its market space.
In cotton trade, Brazil remains a competitor for the United States to penetrate India, but it is possible with coordinated marketing efforts. Global textile landscape will see a shift.
By: Seshadri Ramkumar, Professor, Texas Tech University, USA
