Export orders worth nearly ₹12,000 crore have been lost for the Tiruppur textiles industry in Tamil Nadu since the implementation of the new tariff by the US government from August 27.
There has been around 30 per cent reduction in production capacity but there has been no shut down of units or job losses as yet. When the tariff was implemented, there was widespread fear of closure of units and job losses. However, this did not happen, industry players note. The major impact due to the tariff is expected to be seen in 2026, as most purchase orders for 2025 were placed before the tariffs came into effect, they added.
Currently, factories dealing with US orders are exporting at discounted prices with over 25 per cent. Factory closures and worker layoffs are likely to occur in 2026 if the tariffs continue, sources said.
Large exposure
A source said the units that have large exposure (over 60-70 per cent) to the US are the worst affected. They can take the burden for 2-3 months and after that they may be forced to shut down.
In a recent letter to the Union Textile Secretary, the Tiruppur Exporters Association (TEA) President KM Subramanian said that most of the buyers are demanding steep discounts of 25 per cent to absorb the tariff burden. Buyers are requesting that current orders and new orders be put on hold until the tariff issue is resolved, leading to rising cancellations, he said.
This uncertainty has caused severe liquidity pressure, with exporters unable to plan production schedules or manage working capital effectively. Banks are also cautious in extending credit to US-dependent exporters and with delayed payments, exporters are struggling with loan repayments.
“We urge the government to take immediate and decisive action, recognising that the US tariff shock is a temporary but severe disruption. With timely intervention, India’s MSME exporters can overcome this challenge and continue to be a driving force for inclusive economic growth,” he said.
TEA pegs the cluster to comprise 2,000 exporters and 20,000 standalone units accounting for about ₹45,000 crore of exports and ₹30,000 crore of domestic business. The units employ nearly one million people of which 65 per cent are women. Tiruppur contributes 68 per cent of India’s knitted garment export.
Looking at diversification
While exporters have looked at diversifying their markets, they do not get the rate the same rates as clients in the US offer.
“No one has lost any jobs,” said Thirukkumaran Natarajan, Chairman of Tiruppur-based Esstee Exports India Pvt Ltd and General Secretary of Tiruppur Exporters Association.
When asked how the State government could help exporters in these tough times, Tamil Nadu’s Industries Minister TRB Rajaa told businessline, “We remain in constant touch with them and are encouraging diversification into new markets such as the EU. We have made clear our willingness to extend both logistical and financial support for such market development efforts.”
However, a lasting solution to this problem can only come through the Union Government’s diplomatic efforts. We need the Union Government to strike a deal with the US soon. We also continue to urge the Union Government to step in with easy-term loans and relief measures, similar to those introduced during the pandemic. We are hopeful that Tamil Nadu will emerge stronger from this,” he added.
Aniket Dani, Director, Crisil Intelligence, said that diversifying into other markets is a viable mid- to long-term strategy for India. While some exports can be redirected to the domestic market, it’s unlikely that the entire export volume, especially to the US, can be absorbed domestically, he added.
The Tirupur cluster can tackle the crisis on two fronts. Firstly, by offering value-added services like shortened lead times, vendor-managed inventory, and flexible payment terms to retain customers. Secondly, by focusing on cost efficiencies, Dani said.
News Courtesy : BusinessLine