"Trump’s tariff heat scalds garment industry, other sectors in Karnataka", 12 September 2025

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While textiles, apparel and readymade garments, remain the hardest hit in Karnataka, the tariff’s impact is far broader. Gems and jewellery exports (in Bengaluru and Mysuru) are seeing reduced demand in the U.S., while leather goods (around Bengaluru) face substitution from low-cost producers elsewhere. Engineering goods and auto components exporters are grappling with shrinking demand and higher component costs. In electronics and precision engineering, tariffs combined with elevated supply chain expenses are further squeezing margins...

Karnataka accounts for nearly 20% of India’s garment exports, with Bengaluru, Ballari, and Mandya being the key hubs...

He argued that while importers and retailers/customers in the U.S. may initially absorb the customs tariff burden of the garment industry, eventually they would push back costs on to Indian exporters by renegotiating or demanding discounts. In some cases, part of the tariff may get passed on to American shoppers and that would increase their retail tag prices, he said.

“But in price-sensitive categories (basic T-shirts, jeans), retailers hesitate to increase prices much, so exporters end up absorbing more of the hit,’‘ said Mr. Gokhale, adding that a readymade garment that previously faced an average tariff of around 10% now confronts a total duty of over 60%. “...his steep cost increase makes our products almost impossible to sell at a competitive price in the U.S market,’‘ he stated.

Some garments and apparel manufacturers in Bengaluru have even halted production amid worsening cost competitiveness and order cancellations, and payment delays have become regular, said Mr. Gokhale. This view was echoed by many industry players...

Karnataka is a key hub for aerospace components, auto parts, machinery, and IT hardware. Tariffs on specific product lines increase supply chain and landed costs, hitting MSMEs hardest...

Tariffs will bring not just financial, but also operational and existential burdens on MSMEs, who mostly run on thin 5% to 10% net margins. “A tariff shock of even 10% to 25% on the U.S. side obliterates that cushion unless prices are raised or costs are cut,’‘ said Mr. Gokhale. Also, when tariffs climb to 50% range, low-margin MSMEs are also facing contract attrition as buyers try to consolidate to larger vendors who can finance long cycles and compliance. As labour-intensive units see order flight, chances of factory closures and job fears are high, he explained...

As export orders shrink, there’s a visible impact on jobs, women’s workforce participation, and ancillary sectors like logistics, packaging, and freight forwarding.

The Federation of Indian Export Organisations (FIEO) estimated that some 55% of India’s U.S.-bound shipments...are now exposed to pricing disadvantages of 30% to 35%.

The U.S. tariffs has raised the landed cost of Karnataka’s MSME exports by 20% to 35%, depending on the product...

U.S. buyers, especially large retailers, are unwilling to pass on higher costs to the end consumer. As a result, exporters are facing order cancellations, renegotiated contracts, and delayed payments...observed Mr. Balakrishna.

Industry insiders said that reduced advance payments from buyers and slower order cycles have worsened liquidity conditions. “Rising domestic input costs — spanning raw materials, energy, and logistics — have added to the burden. To sustain operations, many exporters are resorting to short-term borrowings and overdrafts, which increases their financial risk exposure and weakens long-term sustainability,’‘ said Mr. Gokhale...

“Legally, the importer pays the tariff, but in practice the burden is shared: U.S. buyers/retailers face higher landed costs and will often seek price concessions from suppliers or switch sources; where suppliers cannot credibly cut prices, retailers will pass most of the cost to U.S. consumers via higher retail prices,’‘...