Shipments on hold, industry in wait-and-watch mode — India’s carpet industry reels under impact of US tariffs

The US reciprocal tariffs have dealt a blow to India’s $2.93 billion carpet industry. Experts are of the view that tariffs have compounded the worries of an industry that is already grappling with issues related to labour and raw material availability.

India exports its carpets to more than 100 countries, with primary markets including the USA, Germany, Canada, the UK, Australia, South Africa, France, Italy, and Brazil. The country has recently begun exports to China. According to the India Brand Equity Foundation (IBEF), India exported carpets worth $808 million to the US in FY25 (until December 2024), which accounts for about 70% of India’s total exports, making the US the largest market for Indian carpets. The country also shipped handmade carpets worth $667 million to the US during this period. In fact, India is among the largest carpet import markets for the US.

Experts caution that the reciprocal tariff, imposed by US President Donald Trump, is likely to result in a significant increase in the cost of carpets for the American consumers, which may consequently affect the Indian carpet export industry. “India could have a tariff disadvantage vis-à-vis other major exporters of carpets, including Turkey, Egypt, and Mexico, which have a lower US tariff as compared to India,” Sanket Desai, Indirect Tax Partner - Consumer Products and Retail, EY India, says.

According to Desai, Trump tariffs exacerbate the concerns of the already struggling Indian carpet industries, particularly in the case of handmade carpets. “Thousands of families in rural areas depend on the craft of making handmade carpets for their livelihood. The carpet industry was already struggling with issues related to a shortage of quality raw materials, including wool and silk cotton; a global economic slowdown; a shortage of skilled labour on account of artisans shifting to other professions; transport hindrances; and disruptions in the supply chain. This just adds further constraints for the trade,” he explains.

The Indian carpet industry is highly labour intensive and has a rich legacy that spans centuries. It employs more than 2 million workers and artisans, many of whom have been involved in the trade for generations.

As per IBEF data, India is responsible for around 40% of worldwide exports of handmade carpets. In the first nine of FY25 (April-December 2024), India exported carpets worth $1.24 billion compared to $1.39 billion in FY24.

Mahavir Pratap Sharma, Director of Jaipur-based Oscar Exports, a manufacturer and exporter of handmade woollen carpets and other floor coverings, supports Desai’s views. He states the flat duty imposed on both handmade and machine-made carpets creates a very difficult situation to survive. “The Indian handmade carpet industry is not competing with any other country but is competing with machine-made rugs. The base price of machine-made carpets is 1/10th of the price of handmade carpets. Hence, the price per sq. ft in dollar terms would be unbearable for a consumer to absorb in the US. The solution is to have a different HSN code for machine-made carpets, and then we can have zero import duty on the handmade carpet in India and the US. This is the only way that the handmade carpet industry can hope to survive,” he states.

The effect of the tariff imposition is already being felt across the industry. Nikita Khanna, Founder of Kaati Carpets, says that they saw no American buyers at the recently concluded Bharat Tex fair in New Delhi. “After the tariff announcement, not one buyer has flown in from America, contrary to how the situation was earlier. Carpets is a very competitive industry. Right now, business is at a halt,” she says.

Khanna admits that the tariff increases have significantly impacted the industry. “For instance, now if one needs to send a shipment worth X dollars, then 10% must be set aside for customs; earlier the rate was only 3-4%. It has moved up three times for us, which is a lot. Right now, many of the shipments have been put on hold by buyers—it’s simply a wait-and-watch situation,” the entrepreneur explains.

Elaborating more about the situation on ground, Khanna says that she anticipates buyers to suggest splitting the tariff duties between them. “Perhaps the buyers will mention about covering 5% and the remaining 5% to be borne by us. But honestly, we don’t make that much profit to even give 5%. So, everyone is just waiting to see how things pan out. There is no real conclusion yet,” she adds, the tinge of uncertainty and grimness palpable in her voice.