Indian textile companies to benefit from US-China trade war

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The simmering trade war between the US and China is expected to throw open fresh opportunity for the Indian textile industry. The US recently issued a Withhold Release Order on cotton and apparel imports from specific producers in the Xinjiang Uygur Autonomous Region which may escalate global trade tensions.

The US imported $7.35 billion of apparel products from China during January-July 2020, while China exported around 20 per cent of its overall apparel exports to the US in first quarter of this fiscal, said an India Ratings and Research report.

On the other hand, China depends on the US for raw cotton. China may retaliate by cutting down on cotton procurement from the US, leading to favourable supplies from Brazil and India, both of which are likely to have high inventories. While demand from the US could impact the overall cotton demand in China, the value-addition could gradually move out of China to other geographies.

Competition

Indian yarn companies’ dependence on China had reduced to about 20 per cent in the June quarter due to growing competition from Vietnam and Pakistan. India Ratings and Research believes Pakistan and Brazil have a pole position compared with India due to their preferential status. India’s cotton yarn exports declined 28 per cent y-o-y in FY20 to ₹19,600 crore due to a 53 per cent fall in demand from China.

Moreover, severing of ties by global retail brands such as H&M and Lacoste with China on account of labour issues, along with the ongoing US-China trade war, have benefited Indian ready-made garments exporters in the form of additional orders. The agency believes that the vacuum space created would be a positive for Indian garment exporters and help them tide over the impact of pandemic. Furthermore, the home textile segment has reported increased inquiries from the US for sourcing diversification.