Whalesbook
India's Textile Exports Tumble Amid Weak US Demand
India's textile and garment exports to the United States plunged 28.7% year-on-year in February 2026, reaching $0.63 billion. This marks the sixth straight month of decline. For January-February 2026, US imports of Indian textiles fell to $1.34 billion from $1.69 billion a year earlier.
Tariff Relief but Recovery Lags
The initial downturn was heavily influenced by substantial US tariffs. Exporters faced a challenging environment, with combined duties reaching up to 50% at points. A significant development occurred on February 20, 2026, when the US Supreme Court struck down these tariffs, leading to their replacement with a global tariff of 10%. Further relief came around February 4, 2026, with trade negotiations reportedly reducing baseline tariffs on many Indian goods to 18%. Despite these tariff adjustments, recovery has been hampered. Industry sources noted that missed peak season orders mean that even tariff relief cannot guarantee immediate market re-entry and revenue rebound.
Vietnam Leads US Imports as China's Exports Plunge
The US textile import market overall saw a broad decline of 13.47% year-on-year in January-February 2026, totaling $11.53 billion. Within this challenging environment, Vietnam solidified its position as the top apparel exporter to the US, recording $2.99 billion in shipments during the first two months of 2026, a 5.0% year-on-year increase. Vietnam's sustained growth is attributed to its robust Free Trade Agreement network, diversification, and investment in automation.
China, previously a dominant supplier, experienced a dramatic contraction, with exports to the US plummeting by 57.65% to $1.17 billion in Jan-Feb 2026, pushing it to third place in US apparel imports. Bangladesh has now risen to become the second-largest supplier, exporting $1.37 billion in the same period, although this figure represents an 8.53% decline for Bangladesh itself. Its rank improvement is largely a consequence of China's steep fall rather than indigenous export growth.
Weak US Consumer Demand Hits Sales
Beyond tariff impacts, waning consumer confidence in the US and globally is a primary constraint. US consumer confidence saw a modest rise to 91.8 in March 2026, but future expectations weakened, signaling growing caution. Consumers are increasingly prioritizing value for money, driven by persistent inflation and cost concerns, leading to more selective spending. This demand-side weakness creates an environment where even reduced tariffs may not fully offset sluggish sales, as "no amount of duty advantage saves you when demand compresses at the top of the chain."
Financial Strain at Key Companies
Despite recent tariff reductions, India's textile sector faces structural challenges that temper recovery prospects. Historically, India's competitiveness has been weakened by factors such as its removal from the US Generalized System of Preferences (GSP) and higher tariff rates compared to key competitors, with rates historically reaching 26-27%. While Vietnam benefits from a comprehensive FTA network and supply chain advancements, India's progress in these areas, though noted, lags in scale and speed-to-market. Furthermore, companies like Arvind Fashions Ltd. report negative price-to-earnings (P/E) ratios, indicating profitability challenges (-329.1x). Raymond Ltd. shows very low P/E ratios (as low as 0.1739 as of April 2026) and negative 1-year returns [-16.67% for Raymond], suggesting ongoing financial pressures beyond immediate trade policy shifts. The continued reliance on certain segments and potential price pressures from absorbed tariffs can further squeeze margins.
Outlook Remains Uncertain
While tariff reductions and trade agreements offer a potential path to improved competitiveness, the immediate future of Indian textile exports to the US remains closely tied to the health of the American consumer and global demand. Exporters hope to leverage the improved tariff structure to regain lost ground, but the softening demand environment and the need to rebuild relationships with US buyers after missed peak season orders present a complex recovery scenario. The sector's performance in the coming months will likely reflect its ability to navigate both evolving trade terms and the fundamental economic sentiment of its largest export market.