Duty-free cotton offers breather to textile stocks, but US tariff cloud continues to loom

About this update from Vardhman Textiles Limited

Stocks such as Vardhman Textiles, Ambika Cotton Mills, Gokaldas Exports and Indo Count Industries enjoyed a short-lived buzz as India removed duties on raw cotton imports till September 30 in a signal to the US. While analysts believe that the temporary relief could bring respite to their tight margins over the near term as the government aims to cool domestic prices, the medium-term trajectory hinges on how these companies navigate the uncertainty arising from the tariffs levied by the US, and diversify into newer markets.From August 27, India will face 50 percent tariffs from the US administration. A planned visit by US trade negotiators to New Delhi from August 25-29 has been called off, delaying talks on a proposed bilateral trade agreement and dampening hopes of relief from an additional 25 percent US levy starting August 27.Sentiment positive but gaps remainIndependent analyst Ambareesh Baliga agreed that the move is sentimentally positive for cotton stocks that have been wealth destroyers this year. Lower input costs will make the supply chain more competitive, benefiting the entire textile value chain, including yarn, fabric, garments and made-ups, he said.However, Baliga warned that for US-bound exports of apparel and home textiles, the gap would remain significant compared to competing countries such as Bangladesh and Vietnam unless tariffs are reduced to 25 percent.Market expert Ajay Bagga agreed, saying that while the 11 percent duty waiver on raw cotton is a helpful short-term relief for the textile industry, it’s not enough on its own.He believes that the government should roll out a broader support package that includes easier loan access, export incentives and measures to reduce raw material costs. Such steps would give the entire textile value chain, from yarn to garments, the strength to handle challenges like high US tariffs and intense global competition.Indian exports previously faced duties of 0-5 percent, with some textiles taxed at between 9 and 13 percent before tariffs were raised under the Trump administration. Now, the 50 percent tariff is not a standalone levy, it is in addition to the standard US import duty.Reports suggested total duties on Indian textiles and apparel exports to the US will now hit alarming levels across various categories: carpets at 52.9 percent, knitted garments at 63.9 percent, woven garments at 60.3 per...

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