South India cotton yarn market under pressure as US tariffs stifle demand

The tariffs imposed by the US have been a major blow to the South Indian textile industry, particularly in the major hub of Tiruppur, which accounts for a substantial portion of India's knitwear exports. The tariff rate, which has been increased to as high as 50 per cent, makes Indian goods significantly more expensive for American buyers. MK Stalin, Chief Minister, Tamil Nadu says, the tariffs have had a trade impact of around Rs 3,000 crore on the state's textile industry.

The higher tariffs have led to many US orders being put on hold, with some American buyers demanding deep discounts from Indian exporters to absorb the added cost. Some exporters have been forced to accept a cut in profit to retain long-term buyer relationships.

Despite the external pressures, domestic prices for cotton yarn in important markets like Mumbai and Tiruppur have remained stable. This is a fragile stability, however, as it's not supported by strong demand. Buyers are holding off on new orders and are only purchasing what they need for immediate requirements. This is creating an uncertain environment for mills and stockists. The cotton market in Gujarat has also seen stable prices, but demand from mills is subdued as they are hesitant to build up inventory given the weak outlook for yarn.