India’s exports to US hold firm after a year of Trump’s tariffs
A year after the imposition of steep US tariffs on Indian goods, the United States continues to account for roughly one-fifth of India's total exports, with India's export share to the US having grown rather than shrunk compared to a few years earlier.
US tariffs on Indian goods peaked at up to 50% (including an additional levy linked to India's purchase of Russian crude oil) before being scaled back to lower levels following subsequent trade discussions.
India has pursued trade diversification through new bilateral and regional trade agreements and faster export growth to alternative markets, though industry assessments suggest fully replacing US demand could take several years.
The episode highlights the limits of rapid trade diversification given entrenched supply chains, buyer relationships and product-market fit built over decades of trade with the US.
Tariffs and Trade Remedy Measures
A tariff is a tax imposed by an importing country on goods entering from abroad, used either to raise revenue or to protect domestic industry; tariffs imposed for non-economic or geopolitical reasons (e.g., linked to a third country's trade behaviour) function similarly to a sanction. Under World Trade Organization (WTO) rules, tariffs are normally bound by each member's schedule of commitments (Most Favoured Nation principle), but unilateral tariff hikes citing national security or foreign policy grounds bypass the ordinary WTO dispute mechanism, prompting affected countries to seek negotiated settlements or diversify trade.
Key Details
- Most Favoured Nation (MFN) principle under GATT/WTO requires equal tariff treatment among trading partners, subject to bound tariff ceilings.
- Tariffs justified on national-security or "reciprocal" grounds (outside normal WTO schedules) have been a recurring feature of recent US trade policy.
- India-US tariffs on select goods rose as high as 50% at their peak (including a component linked to India's Russian oil purchases) before being reduced in subsequent months.
The India-US tariff episode illustrates how bilateral, non-WTO-routed tariff actions can disrupt established trade flows, testing the resilience of trade relationships built over years.
India-US Trade Relationship and Export Composition
The United States has been India's largest single-country export destination for several years, with exports concentrated in sectors like pharmaceuticals, textiles and apparel, gems and jewellery, engineering goods, IT services and electronics. Despite tariff escalation, the US share of India's total merchandise exports has held at approximately 18-20%, up from about 17-18% a few years earlier, reflecting the depth of existing trade linkages and buyer dependence on Indian suppliers in several product categories.
Key Details
- The US accounts for roughly 18-20% of India's total exports, among the highest for any single trading partner.
- Key Indian export categories to the US: pharmaceuticals, textiles/apparel, gems and jewellery, engineering goods, electronics, IT/ITeS services.
- India and the US have separately been negotiating a bilateral trade agreement (BTA) to address market access and tariff issues.
The stickiness of India's export share to the US, even amid tariff shocks, underscores the practical difficulty of rapid trade diversification despite policy efforts.
Trade Diversification and Free Trade Agreements (FTAs)
Trade diversification refers to a country reducing dependence on a single export market by expanding trade with multiple partners, typically pursued through Free Trade Agreements (FTAs), Comprehensive Economic Partnership Agreements (CEPAs) or Comprehensive Economic Cooperation Agreements (CECAs) that reduce tariff and non-tariff barriers. India has concluded or is negotiating several such agreements — including with the UK, the European Free Trade Association (EFTA) bloc, and is in various stages of talks with the EU and other partners — partly as a hedge against overreliance on any single market such as the US.
Key Details
- India-UAE CEPA (2022) and India-Australia ECTA (2022) are recent examples of trade diversification agreements.
- India-EFTA Trade and Economic Partnership Agreement (TEPA), signed 2024, commits EFTA states (Iceland, Liechtenstein, Norway, Switzerland) to significant investment in India.
- India-UK Free Trade Agreement was concluded/signed in 2025 [Unverified — exact signing date should be cross-checked against latest official confirmation].
Diversification agreements are the main policy lever India is using to reduce US export dependence, though industry estimates suggest a multi-year timeline before alternative markets can substitute meaningfully for US demand.
- US accounts for approximately 18-20% of India's total exports, broadly stable to slightly higher than a few years earlier (from about 17.4% in 2022-23).
- US tariffs on Indian goods peaked at up to 50% (including a levy linked to India's Russian oil purchases) before being reduced in subsequent trade discussions.
- Industry estimates suggest 2-3 years for meaningful diversification away from US export dependence.
- Recent Indian trade diversification agreements: India-UAE CEPA (2022), India-Australia ECTA (2022), India-EFTA TEPA (2024).