Mapping US Tariff Shock at Product Level and Assessing the Transmission Effects of the Supply Chain: A Case of Indian Textile Industry

Sunitha Raju, Sabeer Vc and Ninad Shah

MPRA Paper from University Library of Munich, Germany

Abstract: With India facing highest US reciprocal tariff of 50%, this paper estimates the Direct and Indirect effects of the tariff shock on Indian Textile industry. Using a CES demand model, we estimate the counterfactual demand under 50% and 25% tariff scenarios, structured into two stages. In the first stage, we quantify the tariff induced import changes of 656 textile products at HS 6-digit level and decompose into Direct Tariff effect and Third country tariff effect (Indirect). In the second stage, we quantify the transmission effect along the supply chain using I-O tables. Our analysis shows that US textile imports from India would decline by over US$ 6.6 billion under 50% tariff. Apparel and Made ups face the largest losses. Given the inter-industry linkages, first-order indirect effects are US$ 4.6 billion, including US$ 1.4 billion within the textile sector. Chemicals, agriculture, and trade services account for roughly 40% of these upstream losses. The alternative 25% tariff scenario results in a decline of US$ 2.1 billion in US textile imports, implying that the punitive tariff accounts for the additional US$ 4.5 billion. We conclude that India should negotiate for 25% or lower tariff and focus on alternate markets.

Keywords: Trade policy; Tariffs; Indian textiles; Partial equilibrium; Supply chain (search for similar items in EconPapers)
JEL-codes: F13 F14 F17 O24 (search for similar items in EconPapers)
Date: 2025-12
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