USA Textile Tariffs Strike at the Heart of Vidarbha's Textile Economy

thenewsdirt
Aug 21
8 min read

The recent escalation of USA textile tariffs has created unprecedented challenges for Vidarbha's textile and handloom sector, threatening the livelihoods of thousands of workers in Vidarbha's cotton-growing heartland.

The region that once rivalled Egypt in cotton supply to British mills now faces its most severe export crisis in decades. With the United States accounting for approximately 40 per cent of India's handloom exports and being the largest destination for textile products, the tariff hike from 4.57 per cent to 30.57 per cent represents a staggering 669 per cent increase that could fundamentally reshape the economic landscape of this central Indian region.

Economic Shock Waves Across Cotton Belt Districts and Handloom Sector

The immediate impact of these tariffs has reverberated through Vidarbha's cotton-producing districts, where approximately 70 per cent of the region's 6.2 million tonnes of annual cotton production must be sent elsewhere for processing due to insufficient local manufacturing capacity.

Cotton traders and processors in Nagpur, Akola, Yavatmal, and other key districts report growing uncertainty about future export orders, particularly as competing nations like Vietnam and Bangladesh face lower tariff rates of 20 per cent.

Industry experts estimate that the textile sector alone could lose 100,000 jobs if the current tariff regime continues beyond six months. This projection becomes particularly concerning for Vidarbha, where the textile industry represents a critical employment source for both rural and urban populations.

The region contributes nearly one-third of Maharashtra's cotton production and had been positioned to become India's next major textile hub before these trade disruptions.

The tariff structure combines a baseline 10 per cent duty with a 25 per cent reciprocal tariff announced in April 2025, plus an additional 25 per cent tariff effective from August 27, 2025. This cumulative impact places Indian textile products at a severe disadvantage compared to competitors from Vietnam, Indonesia, and even China, which faces a 30 per cent tariff rate.

Vidarbha's traditional handloom sector, already struggling with structural challenges, faces additional pressure from these trade disruptions.

The region's handloom industry, concentrated in districts like Nagpur, Bhandara, and Gadchiroli, employs a fraction of Maharashtra's approximately 3,509 handloom workers, with many villages experiencing an 80-90 per cent decline in active weavers over recent decades.

The famous Karvati sarees of Vidarbha, which received Geographical Indication status in 2017, exemplify the sector's vulnerability.

These traditional silk sarees, woven by the Halba Koshti community in villages like Dhapewada, represent centuries of craftsmanship but struggle against machine-made alternatives.

With the USA being India's largest handloom export destination, accounting for ₹331.56 crore worth of exports in 2024-25, the tariff escalation threatens to further marginalise these artisanal traditions.

Baba Hedau, an 84-year-old weaver from Dhapewada village near Nagpur, represents the challenges facing this sector. Of the 40 homes that once operated handlooms in his village, only six remain active.

The younger generation increasingly abandons weaving due to poor economic returns, and the new tariffs compound existing market pressures.

Industrial Transformation Stalled

The timing of these tariff increases is particularly damaging for Vidarbha's industrial development plans. The Maharashtra government had recently launched policies aimed at transforming the region into a major textile hub, with significant investments already committed.

A landmark ₹750 crore textile project by OFAB Tech Private Limited in Wardha district promised to create 15,000 jobs and was expected to catalyse broader industrial growth.

Similarly, the state government had secured ₹4,000 crore in textile investments with employment generation of 12,500 jobs specifically targeted at cotton-distressed districts of Vidarbha. These ambitious plans now face uncertainty as potential investors reassess the viability of export-oriented textile manufacturing in the face of prohibitive the USA tariffs.

The region's strategic advantages, including its central location, abundant raw cotton supply, and connectivity through rail, road, and air transport networks, had positioned it favourably for textile manufacturing. The Multimodal International Cargo Hub and Airport at Nagpur (MIHAN) was expected to enhance the region's logistics capabilities for international trade. However, these infrastructure investments may not realise their full potential if export markets remain constrained.

The tariff impact extends beyond finished textile products to affect Vidarbha's entire cotton value chain. Cotton fibre exports from the region, which complement its textile trade by supplying raw material to international mills, face similar pressures.

The region's black cotton soil produces long-staple cotton preferred for higher-quality yarn production, making it a significant supplier to mills across Asia, particularly in Bangladesh, Vietnam, and China.

Local textile manufacturers report immediate challenges in securing export orders. Gautam Singhania, chairman of Raymond, which operates a denim manufacturing plant in Yavatmal, highlighted the region's processing limitations, noting that the company must purchase 30 per cent of its yarn requirements from other states due to local procurement constraints.

These structural weaknesses become more pronounced when export markets contract due to tariff barriers.

The ginning and pressing industries, which form the first stage of cotton processing, also face indirect impacts through reduced demand from downstream textile manufacturers. These facilities employ significant numbers of workers across Vidarbha's cotton-growing districts and serve as crucial links between agricultural production and industrial processing.

Agricultural Consequences

Cotton farmers in Vidarbha face the prospect of below-minimum support price rates as domestic textile demand weakens due to reduced export opportunities.

Traders predict that continued tariff pressures could force cotton prices below the government-set minimum support price of ₹7,521 per quintal, repeating patterns from previous years when farmers struggled with low returns.

The farm crisis in Vidarbha has historically been linked to cotton cultivation challenges, and the current trade disruptions threaten to exacerbate existing agricultural distress. The region's cotton farmers, who have invested heavily in crop production expecting stable demand from local textile industries, now face uncertain market conditions.

Government intervention includes the recent elimination of 11 per cent import duty on cotton, implemented to help domestic prices align with international rates and support textile manufacturers facing competitive pressure. However, this measure also poses long-term risks to local cotton farmers if cheaper American cotton begins flooding the domestic market.

The labour-intensive nature of textile and handloom production in Vidarbha means that trade disruptions translate directly into employment challenges. Industry estimates suggest that 200,000 to 300,000 jobs across India are at immediate risk from the tariff increases, with textile manufacturing being particularly vulnerable due to its high labour content.

In Vidarbha, this employment impact affects both organised and unorganised sectors. Large textile mills face pressure to reduce production or shift operations to lower-tariff destinations, while small-scale handloom weavers and textile workers confront reduced demand for their products.

The region's rural economy, where textile work often provides supplementary income to agricultural families, faces additional strain.

According to the 4th All India Handloom Census, 67.1 per cent of handloom worker households earn less than ₹5,000 per month.

These low-income families have limited capacity to absorb further economic shocks from reduced export demand. Women workers, who constitute a significant portion of the handloom workforce, face particular vulnerability as traditional weaving skills lose market relevance.

Market Diversification Challenges

How U.S. tariffs can affect Vidarbha's cotton and handloom industries. — Market Diversification Challenges

Industry representatives advocate for aggressive market diversification to offset losses in the USA market.

The Confederation of Indian Textile Industry suggests targeting the United Kingdom, European Union, United Arab Emirates, Japan, and South Korea as alternative destinations. However, Vidarbha's textile sector faces practical challenges in implementing such diversification strategies.

The region's existing supply chains and business relationships have been developed primarily for the USA market, requiring significant adjustments to meet different quality standards, design preferences, and regulatory requirements in alternative markets.

Small and medium enterprises, which dominate much of Vidarbha's textile sector, lack the resources and expertise needed for rapid market expansion.

Additionally, competing textile-producing regions in India and other countries are simultaneously pursuing similar diversification strategies, creating increased competition for non-USA markets. This competitive pressure may limit the ability of Vidarbha's manufacturers to simply redirect their existing production capacity to alternative destinations.

The Maharashtra state government and central authorities have announced various support measures aimed at mitigating the tariff impact. These include the temporary elimination of cotton import duties, enhanced marketing support for handloom products, and continued investment in textile infrastructure development.

However, industry representatives emphasise that short-term relief measures cannot address the fundamental challenge of regaining competitiveness in the USA market. The unclear nature of additional penalty tariffs linked to India's relations with Russia creates further uncertainty for exporters planning medium-term business strategies.

Some larger textile companies with international operations, such as Pearl Global, have begun shifting production to facilities in Bangladesh, Indonesia, Vietnam, and Guatemala to bypass the steep USA tariffs. However, this option remains unavailable to most Vidarbha-based manufacturers who lack international production capacity.

The current tariff crisis evokes historical parallels with colonial-era trade policies that devastated Indian textile production. During the 19th century, Vidarbha (then known as Berar) had emerged as a major cotton supplier to British mills, matching Egypt in export volumes by 1867. However, colonial trade policies and tariff structures eventually undermined local processing capabilities, forcing the region into a raw material supplier role.

The present situation threatens to recreate similar dynamics, where Vidarbha continues producing raw cotton while value-added manufacturing shifts to regions with better market access. This pattern would perpetuate the region's economic dependence on agriculture while limiting opportunities for industrial development and employment generation.

Looking ahead, the resolution of current trade tensions between India and the USA will significantly influence Vidarbha's textile industry trajectory.

Planned meetings between Indian and American leadership offer potential pathways for addressing tariff disputes, but immediate relief appears unlikely given the complex geopolitical factors underlying current trade policies.

The long-term sustainability of Vidarbha's textile and handloom sector depends on its ability to adapt to changing global trade patterns while preserving its traditional craftsmanship heritage. This challenge requires coordinated efforts from government, industry, and artisan communities to build resilient economic structures that can withstand external market shocks while maintaining the region's distinctive textile identity.