
Trade flows, consumption, and the economy are all being impacted by the growing trade war between the United States and China.
President Trump’s executive order putting tariffs on Chinese goods went into force today, and China responded with some limited retaliation penalties.
President Trump is using trade and tariffs as bargaining tactics, but these policies have a variety of negative repercussions on the economy, jobs, and consumer spending.
Tariffs for Canada and Mexico remained in effect yesterday before their leaders spoke with Trump, resulting in a one-month suspension for these nations, leaving room for uncertainty. Within 30 minutes of business on February 3, 2025, the Dow fell 600 points as financial markets responded unfavorably to the tariff news.
There are benefits and drawbacks to 10% higher tariffs on Chinese goods globally, and it is unclear how President Trump and President Xi’s anticipated meeting this week will turn out.
While the EU anticipates imposing more duties on their goods to the US, the tariff regime with India stays the same.
Textiles, clothing, and footwear rank among the top ten imports from China, with an estimated value of US$28 billion in 2023, according to the US Census Bureau.
Although importing clothing and textiles from China to the US will be costly, other nations that export textiles, such as Bangladesh, Vietnam, and India, can take advantage of the opportunity to increase their exports.
Online merchants from these nations that are alternatives to China, as well as textile manufacturers in economically viable nations, stand to gain if the increased tariffs persist. American customers who purchased up to US$800 worth of goods from China-based Tume and Shein online without paying any tariffs will be hurt by the higher price. This circumstance can cause purchases to go to other international internet merchants, opening doors for Indian producers and merchants.
The Indian government’s 2025–2026 budget coincidentally included the funding required to increase textile production at the same time as Trump’s tariffs were being debated. For India to compete with China and other low-wage nations, it will be prudent to increase support for research, scale up manufacturing, and enhance quality.
As India competes with China, budget programs like the Cotton Technology Mission, Textile Cluster Development, National Technical Textiles Mission, and Production Linked Incentive are encouraging. Stakeholders in the Indian textile industry should make future plans using the current tariff scenario.
Based on the proposed higher tariffs against Chinese goods entering the United States, India can be a strong competitor and a viable alternative to China. India is subject to a 16.1% tariff on cotton knitted pants and breeches (USA Harmonized Tariff Schedule 6103.42.10) under the general trade system. The 10% duty will result in a 26.1% increase in the price of Chinese goods for American consumers. In such a scenario, trade would move from China to other nations that are more competitive.
India has the chance to increase bilateral trade in textiles and other manufacturing sectors as a result of Trump’s attention on China as a significant rival and national security concern.
The Indian government has released a budget that is favorable of the manufacturing and textile industries, which should help to strengthen ties with the US.