Gokaldas Strategizes EU & Africa Pivot as U.S. Tariffs Threaten Profit Margins

Indian garment exporter shifts production and diversifies markets to offset punitive US trade barriers

Gokaldas Exports, a major Indian textile manufacturer, is expanding its export strategy toward the European Union and UK, while increasing production in Africa to reduce the impact of steep U.S. tariffs that are squeezing profit margins.

Sharp Turn from U.S. Dependency

• Currently, about 75% of Gokaldas’ standalone sales go to the United States; clients include Walmart, Gap, and JCPenney.
• U.S. tariffs could rise as high as 50%, which Gokaldas warns would reduce its core profit margin from ~12% to the single digit range.
• To adapt, Gokaldas has been absorbing some costs and offering discounts to maintain client relationships in the U.S., but acknowledges this approach can’t last indefinitely.

Expanding Production Footprint in Africa

• Part of Gokaldas’ production is shifting to Kenya and Ethiopia, where U.S. tariffs are significantly lower (around 10%), partly due to client requests for African-origin products.
• The company plans to double combined revenue share from the EU and UK from about 10% over the next two years, leveraging trade agreements (including the UK-India Free Trade Agreement).

Risks, Strategy & Global Trade Pressures

• India’s textile export sector (worth ~$38 billion) is at risk of losing competitiveness to countries like Bangladesh and Vietnam, which face lower reciprocal U.S. tariffs (~20%) versus India in many cases.
• If high U.S. tariffs persist, many of Gokaldas’ U.S. clients may further shift supply chains away from India, increasing pressure on exporters to find long-term alternatives.

Market Implications & Broader Effects

• Margin Compression: With U.S. business under pressure, Gokaldas and peers must grapple with lower profitability unless they successfully diversify.
• Trade Realignment: Increased manufacturing in Africa may shift investment flows toward African economies, offering new growth opportunities but also exposing supply chain risk and logistics challenges.
• Foreign Exchange & Tariff Risk: Changes in trade partner exposure may influence currency markets. Import/export firms will adjust pricing, hedging, and contracts in response.
• Competitive Pressure: Other Indian textile exporters may follow Gokaldas’ lead, accelerating geographic and market diversification across the region.