Textile stocks like Gokaldas Exports, KPR Mill surge up to 7% after higher tariffs on Bangladesh

Shares of India’s textile companies, Gokaldas Exports Ltd., KPR Mill Ltd., Vardhman Textiles Ltd., Arvind Ltd., gained as much as 7% on Tuesday, July 8, after the Donald Trump administration in the US, announced a 35% tariff on Bangladesh overnight.Shares of Vardhman Textiles and Gokaldas Exports are up 7% each, while those of Siyaram Silk Mills, Nahar Spinning Mills are up 4% each as well. KPR Mill shares are also up 2% in early trading.

Although this is a marginal reduction from the 37% rate announced in April, it is still higher than the baseline tariff rate of 10%. There is also room for negotiation until August 1, when the tariffs kick-in.Last week, the US had signed a trade deal with Vietnam, where tariffs of 20% were imposed on any Vietnamese export to the US and a 40% tariffs on goods that are transshipped, meaning using one country to export goods made in other countries to avoid tariffs.

India currently has a 10% tariff, but the textile sector, due to differential rates, faces tariffs of up to 26%. In the ready-made garment markets in the US, Bangladesh has a 9% market share, while Vietnam has a 19% market share. India’s market share stands at 6%.A trade deal between the US and India is expected soon, with the Indian delegation having returned from Washington last week.

In case tariffs are lowered during the deal signing, India’s competitive edge over other exporting countries and its market share, are both likely to improve.

On the flip side though, if tariffs remain unchanged, India’s competitive edge over Vietnam may reduce for exports to the US.

Analysts that CNBC-TV18 spoke to said that the scenario remains positive for India’s textile manufacturers and they will find a competitive edge if favorable terms are secured in the deal.

Shares of Vardhman Textiles are trading 7% higher at ₹533.1, while those of Gokaldas Exports are up 7.5% at ₹967.85.