New Delhi: India is bracing for a major export shock after the United States imposed sweeping tariffs, averaging 50%, on a wide range of Indian goods. The sudden move, driven by Washington’s tough stance on trade with Russia, has triggered an urgent response from New Delhi, which now faces a potential $48 billion loss in exports to its largest trading partner.
In response, the government is accelerating efforts to diversify trade routes and tap into new markets across Europe, Asia, Africa, and Latin America to contain the fallout.
Here are the top developments in this story:
1. New Export Strategy In Works
Several media sources indicate the Commerce Ministry is preparing for a flurry of high-level meetings over the next 72 hours with industry stakeholders, trade representatives, and officials from other nations. The aim is to rapidly diversify India’s export portfolio and secure access to new markets, with minimal disruption to labour-intensive sectors most at risk.
2. Focus on 40 Strategic Countries
India is targeting 40 nations, including the UK, Japan, Australia, and key EU members, to absorb the blow of US tariffs, particularly on textiles and apparel. In FY25, Indian textile and garment exports to the US alone were worth $37 billion. These 40 countries collectively import $590 billion in textile and apparel products, making them critical to India’s trade pivot.
The government plans to position India as a reliable source of sustainable, innovative, and high-quality products. Although India already exports to over 200 countries, these 40 are considered the most strategically significant under the current circumstances.
3. Sectoral Impact and Mitigation Plans
Several industries are expected to be affected, including leather, gems and jewellery, and shrimp farming.
Leather Footwear: Exporters, such as Puran Dawar from Agra, have warned of a sharp short-term decline unless countries like the UK, France, and Germany increase imports of Indian leather products.
Jewellery and Diamonds: With the diamond trade employing lakhs, India’s gems and jewellery exports face a serious challenge. Tariffs have spiked from under 3% to over 52%, putting India at a disadvantage compared to rivals like Türkiye and Thailand. The government is eyeing increased trade with Hong Kong, Belgium, and the UAE as a means of compensation.
Shrimp Exports: India exported $2.4 billion worth of shrimp to the US in FY25, 32.4% of its total shrimp exports. With duties expected to surge to 60%, farms in Andhra Pradesh are under severe pressure. The government is exploring expanded exports to Japan, China, and the EU, especially Spain.
4. Tapping New Markets In Africa And Latin America
India is also exploring newer frontiers in Africa and Latin America. Trade with Africa now exceeds $100 billion, and officials are looking to leverage the African Continental Free Trade Area Agreement signed in 2021. Latin American trade stood at $43 billion in 2023 and is forecasted to hit $100 billion by FY28.
5. Domestic Measures to Boost Consumption
To cushion the economy from external shocks, the government is renewing its focus on domestic consumption. A revamp of the Goods and Services Tax (GST) framework is planned ahead of Diwali. The reform is expected to lower prices on key consumer goods, ranging from automobiles and appliances to everyday items.
6. Exemptions And Trump’s Justification
Amid the sweeping trade restrictions, there is some relief. Around 30.2% of India’s exports to the US, worth $27.6 billion, remain exempt. These include pharmaceutical products and active pharmaceutical ingredients, which account for over half of the exempted goods.
The tariffs, including a 25% penalty on nations buying Russian oil, came into effect on Wednesday morning. India has called the move “unjust, unfair, and unreasonable.” In FY25, Indian exports to the US totalled $86.5 billion.
The challenge now is clear: reorient India’s export economy quickly enough to soften the blow of protectionist policies from Washington, while simultaneously strengthening domestic demand to maintain economic momentum.
(With Inputs from agencies)