After the United States under President Donald Trump imposed a sweeping 50% tariff on a large basket of Indian exports, India's trade outlook began appearing gloomy. The tariffs impacted more than 60% of India’s exports to the US, including critical labour-intensive sectors such as textiles, gems and jewellery, marine products and leather goods, while some other sectors such as pharmaceuticals, electronics.
Indian exports to the US have plunged sharply by 37.5 per cent following imposition of tariffs on most Indian goods, according to a report by the Global Trade Research Initiative (GTRI). The report showed that shipments to the U.S. fell 37.5 per cent over four months, from USD 8.8 billion in May 2025 to USD 5.5 billion in September 2025, marking the sharpest and most sustained decline of the year.
Despite the inevitability of tariff impact on India's economy, the blow may not be too damaging. India still remains one of the few bright spots in an otherwise slowing global economy. The IMF’s October 2025 World Economic Outlook (WEO) projects India’s growth at 6.6% in FY26, up from 6.5% in FY25, before moderating slightly to 6.2% in FY27, signalling continued domestic momentum despite rising trade barriers.
A key strategy India is relying on to tackle Trump tariffs is to diversify its export market along with striking trade deals with various countries. This seems to have shown some result.
Trade diversification is showing results
As per a recent report by brokerage firm Elara Capital, India's exports performance remains resilient despite the recent 50% US tariff, with exports rising 6.7% YoY, led by sustained momentum in electronics, engineering goods, and marine products. In Q2FY26, exports recorded 9% YoY growth vs a 7% decline in the past year. Imports too rose 4% QoQ, marking good growth in Q2FY26 despite sluggish global demand. Overall, in H1FY26, merchandise trade deficit stood at USD 155bn vs USD 145bn during the same period last year, with exports up 3% YoY to USD 220bn and imports rising 4.5% to USD 375bn.
Continued diversification of exports, especially labor-intensive, helped limit the impact of Trump tariffs as exports grew 6.7% in September 2025 vs -1.0% in September 2024. Advance purchases along with steady diversification of export destination helped clock in exports growth of 9% in Q2FY26 vs 7% decline in Q2FY25. Exports to Spain, the UAE, China, and Bangladesh have registered steady sequential gains, signaling a partial redirection of trade channels amid tariff-induced disruptions.
Among key items that saw sharp growth in exports in September were electronic exports up 50.5% YoY, which remains buoyant while rice shipments grew 33.2% to USD 924.8mn. Notably, marine product exports, initially expected to be among the most affected by the tariff hike, expanded 23.4% YoY to USD 781mn, reflecting robust diversification of export destinations. Similarly, exports of gems and jewelry rose 0.4% YoY in September 2025, leading to April-September growth of 1.8%.
However, some labor-intensive sectors bore the brunt of tariff-related pressures. Readymade garment exports declined 10.1% YoY to USD 997mn, while cotton and handloom exports contracted 11.7% YoY to USD 930mn, indicating persistent challenges for the textiles sector amid shifting global sourcing dynamics.
Opportunity in adversity
However, the path forward is not without obstacles. One key risk is that the high US tariffs could become permanent or be expanded to additional product lines. If India fails to effectively diversify, the cumulative long-term losses could be substantial.
Moreover, while Gulf and UK markets offer promise, they come with their own tariff and non-tariff barriers. Logistical, certification, and cultural adaptation challenges remain. There is also the risk of over-reliance on a few sectors—such as electronics—where export performance is concentrated in a limited number of large firms.
To sustain momentum, India must double down on improving domestic logistics, reducing input costs, and building robust trade infrastructure. More investment is needed in trade facilitation, warehousing, cold chains, and last-mile delivery systems. The government will also need to be agile in responding to trade shocks, renegotiating terms where needed, and offering direct support to MSMEs that are bearing the brunt of the transition.
In a way, Trump traiffs have emerged as an opportunity for India. If India can come up with a more balanced, diversified export portfolio, it will have turned adversity into long-term gain.
Indian exports to the US have plunged sharply by 37.5 per cent following imposition of tariffs on most Indian goods, according to a report by the Global Trade Research Initiative (GTRI). The report showed that shipments to the U.S. fell 37.5 per cent over four months, from USD 8.8 billion in May 2025 to USD 5.5 billion in September 2025, marking the sharpest and most sustained decline of the year.
Despite the inevitability of tariff impact on India's economy, the blow may not be too damaging. India still remains one of the few bright spots in an otherwise slowing global economy. The IMF’s October 2025 World Economic Outlook (WEO) projects India’s growth at 6.6% in FY26, up from 6.5% in FY25, before moderating slightly to 6.2% in FY27, signalling continued domestic momentum despite rising trade barriers.
A key strategy India is relying on to tackle Trump tariffs is to diversify its export market along with striking trade deals with various countries. This seems to have shown some result.
Trade diversification is showing results
As per a recent report by brokerage firm Elara Capital, India's exports performance remains resilient despite the recent 50% US tariff, with exports rising 6.7% YoY, led by sustained momentum in electronics, engineering goods, and marine products. In Q2FY26, exports recorded 9% YoY growth vs a 7% decline in the past year. Imports too rose 4% QoQ, marking good growth in Q2FY26 despite sluggish global demand. Overall, in H1FY26, merchandise trade deficit stood at USD 155bn vs USD 145bn during the same period last year, with exports up 3% YoY to USD 220bn and imports rising 4.5% to USD 375bn.
Continued diversification of exports, especially labor-intensive, helped limit the impact of Trump tariffs as exports grew 6.7% in September 2025 vs -1.0% in September 2024. Advance purchases along with steady diversification of export destination helped clock in exports growth of 9% in Q2FY26 vs 7% decline in Q2FY25. Exports to Spain, the UAE, China, and Bangladesh have registered steady sequential gains, signaling a partial redirection of trade channels amid tariff-induced disruptions.
Among key items that saw sharp growth in exports in September were electronic exports up 50.5% YoY, which remains buoyant while rice shipments grew 33.2% to USD 924.8mn. Notably, marine product exports, initially expected to be among the most affected by the tariff hike, expanded 23.4% YoY to USD 781mn, reflecting robust diversification of export destinations. Similarly, exports of gems and jewelry rose 0.4% YoY in September 2025, leading to April-September growth of 1.8%.
However, some labor-intensive sectors bore the brunt of tariff-related pressures. Readymade garment exports declined 10.1% YoY to USD 997mn, while cotton and handloom exports contracted 11.7% YoY to USD 930mn, indicating persistent challenges for the textiles sector amid shifting global sourcing dynamics.
Opportunity in adversity
However, the path forward is not without obstacles. One key risk is that the high US tariffs could become permanent or be expanded to additional product lines. If India fails to effectively diversify, the cumulative long-term losses could be substantial.
Moreover, while Gulf and UK markets offer promise, they come with their own tariff and non-tariff barriers. Logistical, certification, and cultural adaptation challenges remain. There is also the risk of over-reliance on a few sectors—such as electronics—where export performance is concentrated in a limited number of large firms.
To sustain momentum, India must double down on improving domestic logistics, reducing input costs, and building robust trade infrastructure. More investment is needed in trade facilitation, warehousing, cold chains, and last-mile delivery systems. The government will also need to be agile in responding to trade shocks, renegotiating terms where needed, and offering direct support to MSMEs that are bearing the brunt of the transition.
In a way, Trump traiffs have emerged as an opportunity for India. If India can come up with a more balanced, diversified export portfolio, it will have turned adversity into long-term gain.
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