India can diversify exports away from US if 100% tariffs imposed, has $200 bn market in 15 other countries: Economist SP Sharma
An economic assessment estimated that India could redirect exports to alternative markets worth roughly $200 billion across 15 countries if steep US tariffs linked to Russian crude purchases materialise
The alternative markets identified include the Netherlands, France, the United Kingdom, Latin American countries, Saudi Arabia, the UAE and Nepal, among others
India's exports to the United States were estimated at $87.3 billion in 2025-26, marginally higher than $86.5 billion in 2024-25, despite tariff-related uncertainty
The assessment characterised India's overall exposure to the US market as manageable given the availability of diversified trade partners
The US Tariff Threat Linked to Russian Oil Purchases
The tariff threat arises from a US legislative and executive push to penalise countries continuing to purchase discounted Russian crude oil after the price cap regime introduced following Russia's invasion of Ukraine. A bilateral trade arrangement in February 2026 had earlier brought US tariffs on Indian goods down from 50% to 18%, but a subsequent Senate-passed sanctions bill has revived the threat of tariffs as high as 100% on countries, including India, still importing Russian energy.
Key Details
- US tariffs on India were raised to 50% in August 2025 (a 25% additional ad valorem duty layered on existing rates) in response to India's continued Russian oil imports
- These were reduced to 18% from March 2026 following a bilateral trade deal in which India committed to curbing Russian crude purchases
- A Russia sanctions bill passed by the US Senate (86-11) in 2026 permits tariffs of up to 100% on countries including India, China, Slovakia, Hungary and Azerbaijan for continued Russian energy imports; the US Trade Representative would set the actual rate, and the President retains a waiver authority
- The bill required House of Representatives approval to become law
The $200 billion diversification estimate is presented as a hedge against this renewed 100% tariff threat, distinct from the already-implemented and since-reduced 50%→18% tariff cycle earlier in 2026.
India's Free Trade Agreement Network as a Diversification Channel
India's expanding network of Free Trade Agreements (FTAs) and Comprehensive Economic Partnership Agreements provides preferential-tariff access to alternative markets, which is the structural mechanism underlying export diversification claims of this kind.
Key Details
- India-UAE Comprehensive Economic Partnership Agreement (CEPA): signed 18 February 2022, in force from 1 May 2022 — India's first comprehensive FTA in the Middle East; bilateral trade and tariff-line diversification have both grown since implementation
- India-EFTA Trade and Economic Partnership Agreement (TEPA), covering Iceland, Liechtenstein, Norway and Switzerland: in force from October 2025; EFTA offers preferential access on 92.2% of tariff lines, covering 99.6% of India's exports including 100% of non-agricultural products
- India's total exports reached a record $863.1 billion in FY26, with FTA-partner markets (UAE, UK, Australia) cited as key drivers of the growth
The markets named as diversification destinations (UAE, Latin America, UK-adjacent Europe) map closely onto India's active or recently concluded FTAs, illustrating how trade-agreement architecture underpins the diversification strategy rather than ad hoc market-seeking.
Trade Diversification Under WTO's Most-Favoured-Nation Framework
Under the WTO's Most-Favoured-Nation (MFN) principle, a member cannot ordinarily discriminate between trading partners without a permitted exception — such as a notified FTA/CEPA. Punitive, country-specific tariffs imposed outside a WTO-sanctioned trade remedy (like anti-dumping or safeguard measures) sit in tension with this principle, which is part of why such tariff threats are often framed as unilateral/geopolitical rather than standard trade-law action.
Key Details
- MFN treatment is a core obligation under GATT Article I, requiring equal tariff treatment for "like products" from all WTO members absent an FTA exception
- Bilateral tariff deals (like the February 2026 India-US arrangement) and threatened punitive tariffs linked to third-country conduct (Russian oil purchases) operate largely outside the WTO dispute-settlement architecture, reflecting the current strain on multilateral trade rules enforcement
The economist's diversification argument implicitly acknowledges that bilateral/unilateral US tariff actions cannot be fully relied upon, making WTO-consistent FTA markets a more predictable long-term export base.
- Estimated alternative export market opportunity: $200 billion across 15 countries
- India's exports to the US: $87.3 billion (2025-26) vs. $86.5 billion (2024-25)
- US tariffs on India: 50% (from August 2025) → reduced to 18% (from March 2026) → threatened up to 100% under 2026 Senate-passed Russia sanctions bill
- India-UAE CEPA: signed 18 February 2022, effective 1 May 2022
- India-EFTA TEPA: in force October 2025; covers 92.2% of tariff lines / 99.6% of India's exports to EFTA
- India's total exports, FY26: record $863.1 billion