The recent plunge in Indian exports to the United States highlights a critical challenge faced by exporters—tariff hikes can rapidly crush market access and threaten industry stability. But here's where it gets controversial: how significant is this shock, and what can be done to mitigate its impact?
Between May and October 2025, India's exports to the US experienced a dramatic decline of 28.5%, a trend driven largely by the US's aggressive increase in tariffs on Indian goods. According to the Global Trade Research Initiative (GTRI), exports declined from $8.83 billion to $6.31 billion within this period. This drop coincides with US duty rates escalating from 10% in April to an initial 25% in early August, culminating in a hefty 50% tariff by late August—marking a 400% rise in tariffs over just a few months.
GTRI pointed out that these rapid tariff hikes have made Indian products among the most heavily taxed in the US market. To put this in perspective, China faces tariffs averaging about 30%, while Japan's tariffs are closer to 15%. Indian exporters, therefore, find themselves at a significant disadvantage, especially in labor-intensive sectors.
The research organization divides Indian exports into three categories:
- Tariff-Free Goods: This includes items like smartphones, pharmaceuticals, and petroleum products. Despite enjoying exemption from tariffs, these exports still declined by 25.8%, dropping from $3.42 billion in May to $2.54 billion in October.
- Items Subject to Uniform Tariffs: Primarily metallic goods such as iron, steel, aluminum, copper, and auto parts, which constitute approximately 7.6% of exports. These also experienced a significant decline of 23.8%, falling from $629 million to $480 million.
- Labor-Intensive Sectors: Including gems and jewelry, solar panels, textiles, garments, chemicals, and seafood—all of which faced the highest tariff rate of 50%. Exports in this group plummeted by 31.2%, wiping out nearly $1.5 billion worth of sales.
And this is the part most people miss: even categories that are officially tariff-free are not immune to the decline. For example, smartphone exports—India’s largest product category to the US—plunged by 36%, from $2.29 billion in May to just $1.50 billion in October. Although a slight monthly recovery was observed in October, the overall trend remains downward. Likewise, exports of pharmaceuticals decreased marginally by 1.6%, and petroleum products dropped by 15.5%. GTRI attributes much of the decline in metals and auto parts to weakening US industrial demand rather than tariff policies, given that tariffs on these categories are uniformly applied across all exporting countries.
In response to this challenging scenario, the think tank urges the Indian government to fast-track the implementation of the Export Promotion Mission, a scheme announced in March and approved in November, which has yet to become operational. They emphasize that delays in executing such schemes—along with the failure of long-standing programs like the Market Access Initiative and Interest Equalisation Scheme to make payments this year—could severely hinder India's export ambitions.
The Export Promotion Mission, with a proposed budget of Rs 25,060 crore from 2025–26 to 2030–31, targets supporting micro, small, and medium enterprises (MSMEs), first-time exporters, and labor-intensive sectors. GTRI stresses that removing the additional 25% duty imposed due to Russia-related sanctions could slash the effective US tariff burden on Indian exports from 50% to around 25%, providing much-needed relief.
Ultimately, the pressing question remains: how can India strategically navigate this tariff terrain? Is accelerating export promotion initiatives enough, or should policy advocates push even harder for the US to reconsider these punitive tariffs? What are your thoughts—can India turn this setback into an opportunity for structural reform and renewed competitiveness? Drop your opinions below and join the conversation.
