Rug Industry braces for 2026 as Indian tariffs reshape the market

Rug executives have their eyes firmly on the tariff situation as we enter 2026. Few industries have felt the impact of the 50% tariffs on Indian goods more acutely than rugs.

For decades, India has been one of America’s primary sources for handwoven rugs. Now U.S. manufacturers and distributors are facing hard choices: absorb the hit, pass it along to consumers or rethink their entire supply chain.

According to the Global Trade Research Initiative, India’s total exports to the U.S. market tumbled 37.5% during the period from May to September this year, knocking the dollar volume down from $8.8 billion in May to $5.5 billion in September.

On Aug. 27, President Donald Trump raised the tariff on Indian goods to 50% as a penalty for the country’s continued importation of Russian oil, according to a White House executive order.

Looking to the future

For many manufacturers, the reduction or removal of tariffs on all handmade rugs sourced from India would restore cost stability across the supply chain, enabling more predictable pricing, sustained investment in product development and stronger support for both retail and wholesale partners.

“We anticipate that recent tariffs will drive lasting structural changes across the U.S. rug industry,” said Diana Samuels, Harounian Rugs International (HRI) director of operations. “Rising import costs and increased price sensitivity among consumers are accelerating a shift toward more affordable machine-made and synthetic alternatives, gradually displacing demand for higher-end handcrafted products.

“A more balanced trade environment would also enhance competitiveness for U.S. importers and retailers, ensuring continued access to a diverse range of high-quality, artisan-crafted and machine-made rugs that consumers demand,” Samuels continued. “In turn, this would support job preservation and growth across distribution, logistics and retail sectors.”

Samuels believes that a fair and collaborative tariff framework that promotes open trade while safeguarding domestic business interests would provide the most sustainable foundation for long-term industry health, market innovation and customer value.

In spite of all of the challenges, several rug manufacturers believe that the increased tariffs will ultimately lead to innovation.

Chad Stark, CEO of Stark Carpet, said he believes the businesses that move fastest by finding creative ways to protect value will be best positioned to emerge stronger on the other side.

Whether to raise prices

Rug manufacturers have dealt with the tariffs in a variety of ways, including absorbing the costs, but others have had to raise prices.

“Capel has been absorbing the tariffs for the past six months, we only raised prices an average of 8% as of Oct. 1,” said Cameron Capel, Capel Rugs president of sales and marketing. “We are hoping the tariff will be reduced, and we will not have to raise again.”

Other companies are implementing surcharges to help offset the higher costs.

“We have not raised our prices yet, but we just implemented a tariff surcharge for the time being until things settle down in the near future,” said Kami Navid, Jaunty Rugs vice president of sales. “We are cutting into our profit margins for the time being.”

Stark said the short term may be challenging. “At 50%, significant price increases are unavoidable,” he said. “Every vendor will be forced to raise prices, and for custom-focused boutiques, the hit is even harder since the extra cost comes straight out of their pocket.”

With certain premium qualities like hand-loomed rugs that are only made in India, there is no alternative supply chain to sidestep the tariffs.

“The 50% tariff has significantly increased production expenses and prompted a strategic reevaluation of our pricing model,” said Samuels. “Material and labor costs have surged, with ripple effects extending to logistics and packaging. In response, we’ve explored alternative sourcing options and adjusted our product mix to maintain value for our customers.”

Samuels said HRI has worked diligently to minimize price increases and avoid passing additional costs onto customers.

Fortunately for rug manufacturer Oriental Weavers, most of its products currently fall under the lowest tariff rate of 10%.

“We have taken many steps to manage expenses throughout the entire supply chain; however, a portion of these additional costs must be passed along in order to maintain a healthy business,” said Andy Brumlow, Oriental Weavers president. “Our focus remains on delivering the highest-quality products at the best possible value for our customers and end consumers. As the tariff situation continues to evolve, we will closely monitor how these changes may influence overall demand.”

Sales volume

Higher costs are also affecting sales going into the new year.

“The tariffs have had some impact on sales volume, and our customers have been a bit reluctant,” said Navid. “They are currently buying inventory only for specific projects instead of buying for stock and their floor displays.”

Samuels from HRI said the company’s substantial inventory of branded products has been a strategic asset.

“But the recent implementation of tariffs has had a measurable impact on both sales volume and customer demand across the U.S. rug industry,” she added. “Price sensitivity has intensified, prompting a reevaluation of product offerings and sourcing strategies to stay competitive.”

Cameron Capel said consumers don’t seem to be surprised by price increases.

“I do feel that consumers have accepted the tariffs,” she said. “As has been the case in recent years, the high-end market remains stable, but it’s the middle to lower-end segments that are suffering.”

For many, India remains an indispensable partner, but the current policy could reshape that relationship in ways that last well beyond this year’s trade dispute.