The trade war between the United States and China is becoming more intense, impacting the economy, consumption, and trade flows. China retaliated with modest duties after President Trump’s executive order putting tariffs on Chinese imports went into effect today.
The economy, jobs, and consumption are all impacted by the trade and tariffs that President Trump is employing as negotiation tactics.
Prior to the presidents of Canada and Mexico negotiating with Trump, tariffs were still in effect yesterday. This resulted in a one-month halt for Canada and Mexico, putting ambiguity on the table. On February 3, 2025, the Dow fell 600 points in 30 minutes of trading as financial markets responded unfavorably to the tariff news.
Globally, there are advantages and disadvantages to 10% higher taxes on Chinese imports. President Trump and President Xi are scheduled to meet this week, but it is unclear what will come of their conversation.
While the EU anticipates imposing more duties on their goods to the US, the tariff regime with India stays the same.
Textiles, clothing, and footwear rank among the top ten imports from China, with an estimated value of US$28 billion in 2023, according to the US Census Bureau.
Although importing clothing and textiles from China to the US will be costly, other nations that export textiles, such as Bangladesh, Vietnam, and India, can take advantage of the opportunity to increase their exports.
If the increased tariffs persist, online retailers from these nations that are alternatives to China as well as textile manufacturers in economically viable nations stand to gain. The increased cost of the purchase will be painful for American customers who received tariff-free online retail purchases from China-based Tume and Shein up to US$800. Purchases may move to other international internet merchants as a result, opening doors for Indian producers and merchants.
Coincidentally, the Indian government’s 2025–2026 budget includes the funding required to increase textile production at the same time as Trump’s tariffs were being debated. In order to compete with China and other low-wage nations, India will need to make timely investments in increased support for research, expanded manufacturing, and quality improvement.
As India competes with China, budget programs like the Cotton Technology Mission, Textile Cluster Development, National Technical Textiles Mission, and Production Linked Incentive are encouraging. Stakeholders in the Indian textile industry should make future plans using the current tariff scenario.
Based on the proposed higher tariffs against Chinese goods entering the United States, India can be a strong competitor and a viable alternative to China. India is subject to a 16.1% tariff on cotton knitted pants and breeches (USA Harmonized Tariff Schedule 6103.42.10) under the general trade system. The 10% duty will result in a 26.1% increase in the price of Chinese goods for American consumers. In such a scenario, trade would move from China to other nations that are more competitive.
India has the chance to increase bilateral trade in textiles and other manufacturing sectors as a result of Trump’s attention on China as a significant rival and national security concern.
The Indian government has released a budget that is favorable of the manufacturing and textile industries, which should help to strengthen ties with the US.