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When the United States unveiled its latest tariff schedule, one number immediately caught the attention of India’s textile industry. India would face a 10 per cent tariff, while Vietnam—its biggest rival in apparel exports—would be subjected to a 12.5 per cent levy.
For an industry that has watched Vietnam steadily capture global market share over the last decade, the announcement appeared to mark a rare reversal of fortunes. After years of complaining about being disadvantaged by free trade agreements enjoyed by competitors, Indian exporters suddenly found themselves with a pricing edge in one of the world’s largest apparel markets. But beneath the optimism lies a far more complicated story.
In exclusive conversations with Firstpost, exporters, and former policymakers cautioned that the tariff differential, while significant, is unlikely to trigger an immediate migration of global sourcing orders. The reason is simple: global supply chains are built over decades, not around a 2.5 percentage-point tariff differential.
Instead, they argue, the latest US decision should be viewed as a strategic opportunity rather than an outright victory.
The optimism is real — but so is the caution
Ajay Sahai, the director general and CEO of the Federation of Indian Export Organisations (FIEO), believes India has emerged in a relatively favourable position compared to some of its biggest competitors.
“First of all, we are in the lowest tariff bracket at 10 per cent, along with Bangladesh, Indonesia, Cambodia, and Malaysia. So we have a level playing field,” Sahai told Firstpost.
But almost in the same breath, he offers the first warning. The notification also talks about a tariff-rate quota (TRQ) for Bangladesh, Cambodia, Indonesia, and Malaysia. They may get a further duty concession on certain quantities. We have to be a little careful because these are our competitors in the apparel and textile sector,” he said.
That caveat could prove crucial.
A tariff-rate quota allows imports up to a specified quantity to enter at a lower tariff before the standard duty applies. If countries such as Bangladesh or Cambodia receive preferential quotas, India’s current pricing advantage could shrink considerably.
“As of now, we are better off than China and Vietnam. We are at par with Bangladesh. But Bangladesh and these countries may have an advantage once the TRQ is rolled out,” Sahai said.
Why Vietnam isn’t losing sleep just yet
Much of the excitement surrounding India’s lower tariff assumes that global apparel brands will begin shifting production away from Vietnam. Industry executives say it is not that simple.
Vietnam today is not merely another manufacturing destination — it has become one of the world’s most deeply integrated apparel supply chain hubs.
According to the WTO and Vietnam’s Ministry of Industry and Trade, Vietnam exported over $44 billion worth of textiles and garments in 2025, making it the world’s second-largest apparel exporter after China. The country has built its rise on an extensive network of free trade agreements—including the CPTPP, EVFTA, and RCEP — along with highly integrated manufacturing clusters and a strong focus on synthetic textiles.
Equally important, Vietnam has become the manufacturing base for some of the world’s biggest fashion brands.
Companies including Nike, Adidas, Puma, Lululemon, Under Armour, and Gap source a substantial portion of their apparel and footwear from Vietnam. Nike alone manufactures roughly half of its footwear and nearly one-third of its apparel in Vietnam, making the country central to its global supply chain.
That ecosystem cannot simply be replicated because tariffs changed by 2.5 percentage points.
“A difference of 2.5 percentage points is definitely an advantage to India compared to Vietnam. But I don’t think investments that have already moved there will shift just because of this. Future investments may come to India, but existing supply chains are unlikely to relocate,” Sahai said.
The sleeping giant that never woke up
If tariffs alone cannot rewrite global sourcing patterns, the obvious question is, why has India, despite having one of the world’s largest textile ecosystems, consistently underperformed Vietnam and Bangladesh? The irony is difficult to ignore.
India grows the cotton, spins the yarn, weaves the fabric, processes the cloth, and stitches the garments. Few countries possess such a complete textile value chain. Yet, over the last two decades, Vietnam and Bangladesh—countries that import a significant portion of their raw materials—have consistently outpaced India in apparel exports.
Former Textiles Secretary Upendra Prasad Singh believes India’s greatest strength has paradoxically become one of its biggest inefficiencies.
“Our major strength is that we are present across the entire value chain — from raw material to spinning, weaving, processing, and garmenting. Unlike many countries, we are not heavily dependent on imported intermediate products,” Singh told Firstpost. But unlike Vietnam’s integrated industrial clusters, India’s textile ecosystem remains scattered across the country.
“Our value chain is highly fragmented. Raw material is available in one part of the country, spinning happens elsewhere, weaving somewhere else, processing in another state, and garmenting in different clusters. This increases logistics costs and delivery time. We also lack the scale that countries like Bangladesh have achieved,” he said.
That, Singh says, was precisely the rationale behind the government’s PM MITRA Mega Textile Parks, designed to create integrated plug-and-play manufacturing hubs where spinning, weaving, processing, and garmenting coexist within a single ecosystem.
“If we address scale, integrated manufacturing, and logistics, India’s competitiveness can improve substantially,” he said.
India has been chasing the wrong market
Logistics tell only half the story. According to Ajay Srivastava, the founder of the Global Trade Research Initiative (GTRI), India’s biggest strategic mistake has been betting overwhelmingly on cotton while the rest of the world moved towards synthetic and performance textiles.
“Today, two-thirds of world garment trade happens in synthetic, sportswear, and mixed fabrics. In India’s case, it is the reverse. Two-thirds of our exports are cotton-made garments. We are insignificant in two-thirds of what the world buys and sells,” Srivastava told Firstpost.
That single statistic perhaps explains why Vietnam has steadily climbed the global rankings. As athleisure, sportswear, performance wear, and fast fashion reshaped consumer demand over the last decade, Vietnam aggressively built manufacturing capabilities around polyester, blended fabrics, and man-made fibres. Bangladesh followed a similar strategy, importing synthetic yarns and fabrics before exporting finished garments.
India, by contrast, remained largely cotton-centric. “Vietnam and Bangladesh allowed free imports of synthetic fabrics and yarns. They became stitching factories serving the world. Their exports picked up very fast because they attacked that two-thirds portion of world trade,” Srivastava explained.
For him, the latest tariff differential offers little comfort if India’s export basket itself remains misaligned with global demand.
“To win the game in developed markets, we need much more than small duty cuts. We need quality, consistency, delivery schedules, and certifications. Just a 2.5 per cent tariff difference here and there is not going to make much difference,” he said.
Tariff-free doesn’t mean market access
Perhaps the biggest lesson comes from Japan. India already enjoys preferential access to several markets, yet that has not automatically translated into export growth. Srivastava recalls India’s negotiations with Japan, where tariffs on garments were reduced significantly. Yet exports barely moved. Former Textiles Secretary Singh says the reason is straightforward: developed markets increasingly buy compliance, not just competitive pricing.
“Quality, timely delivery, and compliance are extremely important,” Singh said. He points to Japanese retail giant Uniqlo, one of the world’s largest apparel brands, as a telling example.
“Uniqlo sources so much material from Bangladesh and Vietnam. They source only from two producers in India because their standards are extremely exact,” Singh said.
Those standards extend well beyond the garment itself. “They don’t just look at the quality of the cloth. They examine environmental standards, whether factories are green certified, whether there are separate facilities for women workers, creches for children, sustainability practices, and even how much water is consumed during production. Unless we become fully compliant with these standards, whatever tariff advantage we have will not be enough,” he added.
Those requirements are becoming even more stringent as Europe moves towards tougher sustainability regulations and supply-chain due diligence norms.
Europe may matter more than America
Ironically, while much of the industry’s attention remains fixed on Washington, exporters increasingly believe the real opportunity lies across the Atlantic.
India’s recently concluded trade agreement with the United Kingdom and the proposed India-European Union Free Trade Agreement are expected to gradually eliminate duties of around 10-12 per cent on garments entering Europe.
For an industry that has long argued it was competing against Vietnam and Bangladesh with one hand tied behind its back, the agreements could finally restore competitive parity.
“The biggest win is Europe. We are already receiving enquiries from European buyers. European companies are even looking at investing in manufacturing facilities in India. These FTAs can reshape the apparel business,” said Neeraj Duggal, director of Inovativa Global, a global sourcing specialist working with several Indian and international apparel brands.
Singh shares that optimism. “Any FTA with the European Union would certainly benefit the textile sector because tariffs have historically influenced sourcing decisions in Europe,” he said. But both Singh and Srivastava caution against viewing FTAs as a silver bullet.
The experience with Japan, they argue, demonstrates that tariff preferences open doors—but only globally competitive manufacturers can walk through them.
The road ahead
Taken together, Firstpost’s conversations with exporters, policymakers, and trade experts point to a clear conclusion. Trump’s latest tariff announcement has undoubtedly given India a tactical edge over Vietnam in the US market. But that advantage remains fragile, particularly if tariff-rate quotas are extended to competing exporters or Washington again alters its trade policy.
The larger opportunity lies elsewhere. If India can combine preferential market access through FTAs with investments in man-made fibers, integrated textile parks, technical textiles, factory certification, sustainability standards, and faster logistics, it could finally begin to reclaim market share lost over the last two decades.
The country has long possessed the raw materials, the workforce, and one of the world’s most comprehensive textile value chains. The question now is whether it can convert a short-term tariff advantage into a long-term manufacturing advantage. Or whether, once again, the world’s sleeping textile giant will watch another opportunity pass by.
