Tariffs and Iran war threaten India’s $100 billion garments export goal
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While India’s textile industry was stabilizing after the US tariffs, it has suffered another blow. Industry leaders tell me the Iran war is driving up costs, hitting demand and causing workers to flee, dashing hopes for a sustainable recovery.
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In this photo taken on September 23, 2025, employees work at a garment factory in Tiruppur, in India’s southern state of Tamil Nadu.
R. Satish Babu | Afp | Getty Images
Indian textile exporters could be forgiven for thinking they are in US President Donald Trump’s crosshairs.
In August last year, Washington imposed a 50 percent tariff on Indian goods, making exports uncompetitive. Relief came months later, when interest rates were cut in February, but this lasted only a few weeks: Trump’s subsequent war against Iran threw India’s textile industry into new turmoil.
Apparel companies are among those most affected by US tariffs, losing orders or having to give discounts to retain customers, experts said, adding that the Iran war has increased the costs of raw materials and packaging.
The war, which started on February 28 after the US and Israel struck Iran, disrupted the movement of goods through the Strait of Hormuz, increasing energy and freight costs and straining supply chains.
This has led to some unusual challenges for the textile industryIndia’s second largest employer Which one does it support? More than 45 million jobs.
Some migrant workers employed by textile companies are struggling to obtain liquefied petroleum gas, the primary fuel used in cooking, industry leaders said. This situation caused some of them to return to their hometowns.
second blow
“It was a tough year, and just when things started to pick up in February, this battle started,” Ashwin Chandran, president of the Confederation of Indian Textile Industry, told CNBC.
Between April 2025 and February this year, India exported cotton and synthetic yarnAccording to data from the Indian Ministry of Commerce, the value of fabric and ready-made clothing fell to 29.5 billion dollars from 29.8 billion dollars the previous year. While the decline may seem modest, the direction of travel is alarming for a country. It aims to export 100 billion dollars Annual textile value by 2030
“We were waiting for MY27 [financial year ending March 2027] Madhu Sudhan Bhageria, president of synthetic and polyester filament yarn manufacturer Filatex India, said “it will be much better, but now with the Iran war the start is not very encouraging.”
He explained that polyester prices, which are dependent on oil, have risen by more than 40% since the beginning of the war, making it difficult to pass the costs on to customers.
“Demand dropped because people didn’t want to buy at high prices.” Bhageria said, adding that fears of a sudden end to the war have made companies wary of being stuck with expensive stocks if prices fall sharply.
Experts warned that production cuts would occur if companies could not cover higher costs.
In a temporary relief, the United States and Iran agreed to a ceasefire on Wednesday, and Tehran said safe passage for ships would be “possible” for the next two weeks in coordination with the country’s armed forces.
Despite this, companies such as Filatex have already reduced production by 25% and expect demand to return.
Demand concerns
India is the world’s sixth-largest textile exporter and the sector was expecting a sharp recovery after signing trade deals with the UK last year and the EU and US earlier this year. But so far that doesn’t seem to be the case.
“We are targeting a compound annual growth rate of approximately 12 percent to 15 percent.” [compound annual growth rate]”But growth is lower for the fiscal year ending March 2026, averaging around 9%,” said Pallab Banerjee, chief executive of Pearl Global Industries, which supplies apparel to JCPenney, Macy’s and Walmart.
Experts say that ready-made clothing companies have managed to pass on some of the costs to their customers in the USA, but concerns continue that demand will slow down if oil prices in the USA increase further.
While Trump’s easing of tariffs in February was a relief, Banerjee warned that a protracted war like the outbreak of the Ukraine war in 2022 could dampen US consumer demand.
This conflict has led to slow store sales, increased inventories and significant challenges for US retailers, he said, adding: “No one wants a repeat of this.”
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