How Will US Tariffs Reshape India’s Export Story in Textiles, Diamonds & Tea?

Textiles, Diamonds, Tea & MSMEs — Impact of US Tariff Hike

Click Here — Quick snapshot

• US tariff shock hits textiles (28% of exports to US), gems & jewellery, and tea.
• Surat diamond production down ~40% after effective 55% rate on some items; layoffs likely.
• Tea exports (16.8 mn kg to US in 2024) face buyer price cuts of 20–25%; blends at risk.
• MSMEs in textiles, leather, gems & jewellery worst hit — call for ₹25,000 cr support fund.
• Short-term response: export incentives, working capital, bank support, market diversification and urgent trade talks.

Bird’s eye view

MSMEs: Worst hit, especially textile, leather, gems & jewellery. Industry asks Centre for a ₹25,000 crore support fund.
Textiles: 28% of exports to US — urgent push for incentives & FTAs; Centre exploring 40 new markets via missions.
Diamonds: Surat hub cut production ~40% after effective tariff rose to 55%; exports down to $28.67 billion in 2024-25.
Tea: 16.8 million kg exported to the US in 2024; buyers pressing for 20–25% price cuts — risk of long-term reformulation of blends.

Textiles & Apparel — exposure and immediate asks

With the US accounting for roughly 28% of India’s textile and apparel exports, the sector faces a meaningful demand shock after tariff increases. Key industry asks include targeted export incentives, fast-tracked FTAs with the EU/UK, and banking support for working capital and pre-shipment finance.

• Temporary export duty drawback/top-up incentives on affected lines.
• Short-term working-capital credit lines with interest subvention for MSME exporters.
• Mission-led market development (40 countries) with focused trade delegations to EU, UK, Middle East and Southeast Asia.
• Subsidised logistics & compliance help to reduce landed cost in alternate markets.

Diamonds & Gems — Surat under pressure

Surat — the global finishing hub employing nearly 800,000 artisans — has seen production cuts of up to 40% as buyers reassess purchases after the US raised duties (initially 26% in April, later effective 55% on certain lines). India’s gem & jewellery exports were $28.67 billion in 2024-25; shipments to the US alone were about $9.24 billion.

• Urgent government-industry talks with the US for carve-outs/zero-duty access on complementary product lines.
• Export insurance and buyer-risk cover to maintain order flows; subsidised freight for new markets.
• Wage support or stone-based piece-rate stabilisers to avoid mass layoffs while orders clear.
• Diversify buyer-base (EU, UAE, Far East), and accelerate branded/value-added push so margins are less tariff-sensitive.

Tea — blends and value at stake

India exported 16.8 million kg of tea to the US in 2024 (≈6.6% of volume, 9.4% by value). US buyers are asking for 20–25% price cuts and considering multi-origin reformulations — a long-term demand risk for value-added and speciality teas.

• Negotiate with buyers for phased price adjustments rather than abrupt cuts.
• Push into alternative markets (China, Middle East, EU) for speciality and organic lines.
• Government-supported marketing missions for premium teas and assistance to meet private-label requirements.

MSMEs — shock absorbers need support

MSME exporters in textiles, leather, gems & jewellery are the most vulnerable. Industry is pressing for a ₹25,000 crore targeted support fund — for wage subsidies, working capital and order financing to avoid shutdowns and layoffs.

• Emergency working-capital windows and export-credit enhancement for MSMEs.
• Fast-track duty drawback, remission equivalents and GST refunds to keep liquidity flowing.
• Targeted skilling & wage support for artisans while orders are re-routed.

Roadmap — short, medium & long term

1. Short term (0–6 months): Working-capital support, export top-ups, buyer-risk insurance, urgent US talks for carve-outs.
2. Medium term (6–18 months): FTAs with EU & UK, logistics cost reduction, and branding/value-add push.
3. Long term (18+ months): Move up the value chain (design, branding), diversify clients, strengthen domestic inputs.

Conclusion

The tariff shock is a cross-sector stress test — textiles, diamonds and tea (and the wider MSME base) need a mix of immediate liquidity and market diversification measures. Government-industry coordination on incentives, trade negotiations and bank support will determine whether the hit is temporary or structural.

SEBI Disclaimer:

The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.

Written by Indian-Share-Tips.com, which is a SEBI Registered Advisory Services