A new trade framework between the United States and India, announced recently, is poised to dramatically alter the landscape of the fashion industry's global supply chain. This agreement signals a potential recalibration of sourcing economics, making India a more attractive manufacturing base. While the full implications are yet to be seen, this development could usher in a new era for fashion brands seeking diversified production options.
Details of the Emerging US-India Trade Relationship
In a significant development on February 2nd, the US President and Indian Prime Minister unveiled a new trade framework. This accord, initially announced via Truth Social, aims to substantially decrease the tariff burden on Indian goods exported to the US. Previously, these tariffs reached as high as 50%, but are now expected to drop to approximately 18% once formally implemented. For the fashion sector, which has navigated considerable tariff volatility, geopolitical uncertainties, and supply chain fragmentation, this shift could rapidly transform sourcing strategies. India, long recognized for its potential but often underutilized in manufacturing, is now positioned to become a key player in the 'China-plus' diversification initiatives, which had lost momentum due to earlier tariff disruptions.
Despite the positive outlook, a degree of uncertainty persists. The agreement is currently framed as a broad understanding rather than a finalized free trade pact, meaning crucial specifics—such as definitive tariff rates, exact implementation timelines, and the full scope of products covered—are still awaiting confirmation. Steve Lamar, President and CEO of the American Apparel & Footwear Association (AAFA), cautions against premature celebration, emphasizing that the lack of an official document leaves many critical details ambiguous, including the precise application and effective date of the tariff changes.
India's presence in the US apparel market has seen steady expansion, notwithstanding existing structural challenges. Data from the US International Trade Commission indicates that in the initial 11 months of 2025, India supplied 6.5% of US apparel imports by value, a notable increase from 5.7% in 2022. While footwear imports from India remain modest, below 2%, the growth in apparel is concentrated in cotton-based items. Key categories include men's cotton knit tops, women's blouses, babywear, and home textiles, with India now ranking as the third-largest supplier of men's cotton knit tops to the US, following Vietnam and Bangladesh.
The appeal of India as a sourcing destination extends beyond tariff considerations. Industry analysis shows India was already gaining traction before last year's market upheavals. The US Fashion Industry Association's 2025 Benchmarking study revealed that 77% of surveyed US fashion brands and retailers sourced from India in 2025, with 60% intending to boost their sourcing from the country through 2027.
However, this momentum faced a setback when US tariffs on Indian products surged past 50%. Between September and November, India's apparel exports to the US saw a 16.25% year-on-year decline, highlighting the swift impact punitive duties can have on order volumes, as noted by Dr. A. Sakthivel, chairman of India's Apparel Export Promotion Council (AEPC).
Should the proposed tariff reduction to an effective rate of 18% be enacted, Dr. Sakthivel anticipates a robust recovery. India's apparel exports to the US reached approximately $5.33 billion in fiscal year 2025, constituting about a third of the nation's total apparel exports. He believes reduced duties could unlock an additional $3 billion in annual business, particularly for cotton-rich products such as T-shirts, shirts, babywear, and innerwear. India's competitive edge is bolstered by its extensive raw material base. As a leading global cotton producer, over 60% of US apparel imports from India contain cotton fibers, including a significant proportion of organic cotton. This vertical integration, encompassing fiber, yarn, fabric, and garment production, mitigates exposure to upstream market volatility.
Vincent Quan, a professor of fashion business management at New York's Fashion Institute of Technology (FIT), observes, "India stands out as one of the few nations capable of simultaneously offering scale, diversity, and fiber depth. While it's unlikely to entirely replace any single sourcing hub, its importance within a diversified portfolio is steadily increasing." This perspective underscores India's strategic value in the evolving global supply chain. Rita McGrath, a management professor at Columbia Business School, further suggests that the traditional "China plus one" strategy is rapidly transitioning into a "China plus three or four" approach, reflecting a broader imperative for diversification across all sourcing hubs, not just China.
Nevertheless, tariffs represent just one factor in an increasingly intricate sourcing equation. Persistent challenges include infrastructural limitations, port congestion, high inland transportation expenses, and audit fatigue. Margaret Bishop, an assistant professor and textile supply chain management expert at Parsons School of Design, notes, "Logistics in India have posed difficulties, with clients encountering greater obstacles compared to other Asian sourcing locations." Dr. Sheng Lu, director of the department of fashion and apparel studies at the University of Delaware, adds that contemporary apparel sourcing decisions are influenced by a wider array of considerations beyond mere cost, such as market responsiveness, adaptability, and compliance. For brands, the primary concern isn't missing an opportunity, but rather misjudging its durability. The past year has demonstrated how rapidly trade conditions can shift and how easily announced agreements can be modified or revoked. Achim Berg, founder of the industry think tank FashionSights, points out, "Tariffs serve as instruments of political leverage. The situation is highly unpredictable, difficult to forecast, and not solely driven by economic factors." This inherent volatility deters long-term investment. Brands are becoming increasingly reluctant to commit substantial, fixed resources to new sourcing countries without assurances of policy stability. Consequently, flexibility has emerged as the dominant strategy.
The US-India agreement is indicative of a broader trend towards bilateral, transactional trade negotiations that are reshaping global supply chains. Multilateral agreements involving the US are largely off the table, and existing pacts are increasingly seen as subject to revision. Greg Husisian, a partner at Foley & Lardner, explains, "This reflects a fundamental change in how the US engages in trade with emerging manufacturing markets. Tolerance for trade deficits is no longer perceived as advancing broader foreign policy objectives." McGrath elaborates, "The conventional approach—building enduring strategies around stable trade regimes—is no longer viable. The successful players will be those who maintain adaptability and can quickly adjust when conditions evolve." India's expanding role as a trade partner offers insights into the shifting landscape of competitive advantage worldwide. McGrath characterizes it as a classic instance of "transient advantage"—defined by a brief window of advantageous positioning rather than sustained dominance.
The newly established 18% tariff positions US duties on Indian garments slightly below those levied on Bangladesh and Sri Lanka, both at 20%. Concurrently, India now benefits from preferential or improved access to three of the world's largest apparel markets—the US, the EU, and the UK—a combination few other sourcing nations can currently match. This advantage is further amplified by instability elsewhere; Bangladesh, India's closest rival in low-cost apparel, is contending with daily power outages, political unrest, and factory closures that have disrupted production and eroded buyer confidence. McGrath asserts that the most crucial factor is not individual data points, but the evolving methodology of sourcing decisions. The criteria that once predominantly guided supplier selection—price, quality, and volume—no longer operate in isolation. She concludes, "What clients now seek is flexibility and the capacity to react instantaneously to a dynamic competitive landscape. That is the essence of competitive advantage today: it is contextual, provisional, and constantly in motion."
Indeed, McGrath adds that the recent India-EU agreement provides a valuable parallel for how frameworks such as the US-India pact can influence sourcing and investment decisions. Under that free trade agreement—the largest ever negotiated by either party—European luxury brands will gain enhanced access to a broader range of premium raw materials from India, including exotic leathers, precious gems, and artisanal textiles. For fast fashion enterprises, the opportunity is more focused but still significant, opening specific avenues for supply chain diversification. McGrath observes that different brands will make distinct strategic choices based on their market positioning and risk tolerance. Therefore, India's current prominence is genuine but conditional. The tariff adjustment could stimulate deferred orders and rejuvenate momentum, particularly in essential cotton products and mid-volume categories. Nevertheless, without firm commitments and predictable policies, the opportunity remains uncertain for the time being. In the immediate future, most brands are anticipated to adopt a cautious "wait-and-see" approach, deferring major sourcing changes until details are finalized. In the longer term, India is unlikely to completely supplant China or Vietnam, but it is well-placed to solidify its role as a fundamental component within increasingly diversified sourcing portfolios. Lu projects, "I do not foresee India becoming a top three US supplier within the next five years. However, it is well-positioned to continue expanding its market share." McGrath advises brands contemplating deeper sourcing operations in India to cultivate relationships rather than merely contracts. She states, "Indian manufacturers are rebuilding trust after a challenging 2025. Many exporters absorbed losses over the past six months to retain US customers. Those who invest in genuine collaborations—sharing demand forecasts, cooperating on capacity planning, and maintaining orders through periods of volatility—will receive preferential treatment when capacity becomes constrained."
Reflections on Global Trade and Supply Chain Resilience
The recent US-India trade agreement highlights a critical juncture in global commerce, demonstrating how geopolitical strategies can directly influence economic dynamics, particularly within the fashion industry. This move underscores the imperative for businesses to foster adaptable and diverse supply chains in an unpredictable world. It also reveals a growing trend towards bilateral deals that prioritize national economic interests and security over traditional multilateral frameworks. The shift toward a 'China-plus' strategy, now evolving into 'China plus three or four,' signals a deeper, more fragmented approach to sourcing. Brands that succeed in this new environment will be those that embrace flexibility, cultivate robust partnerships, and proactively navigate evolving trade policies rather than reacting to them. This development serves as a reminder that stability in trade is no longer a given, and resilience will be key to long-term success in the interconnected global marketplace.