By Sanskriti Global Exports by Himanshu Gupta

Navigating the Headwinds: Decoding India's New Trade Playbook Amid US Tariffs

In the complex theatre of global trade, agility is survival. For Indian import-export professionals, the last few years have been a masterclass in navigating geopolitical crosscurrents, supply chain disruptions, and the persistent challenge of protectionism. A recently released government report, projecting a strong growth outlook for FY26, provides a crucial lens through which we can understand New Delhi's strategy—and more importantly, what it means for businesses on the ground.

The report, while optimistic on domestic drivers, pulls no punches regarding the external environment. A startling statistic from the analysis, based on the latest trade data, reveals that approximately 55% of Indian exports to the United States have been affected by tariff hikes. This isn't just a number; it's a reflection of a shifting trade paradigm that demands a strategic, not just a reactive, response. Let's dissect the findings of this pivotal report and translate them into a practical playbook for the Indian trade community.

The Government Report: A Tale of Resilience and Realignment

The core message of the government's analysis is one of cautious optimism. It forecasts robust GDP growth for the fiscal year 2026, underpinned by strong domestic demand, sustained government capital expenditure, and a resilient services sector. However, the report candidly acknowledges the headwinds from our largest trading partner, the United States.

The 55% figure is a cumulative reflection of various US trade policies, including the earlier withdrawal of the Generalized System of Preferences (GSP) benefits and specific tariffs on goods like steel and aluminum. This has created significant price pressure and uncertainty for Indian exporters in key sectors. The report indicates that while the overall export volume to the US has not collapsed, profit margins are thinning, and the long-term risk of over-reliance on a single, increasingly protectionist market is now a central policy concern.

In response, the government's strategy is clear and twofold: diversification and deepening domestic capabilities. The report explicitly highlights the recent success of Free Trade Agreements (FTAs) with the UAE and Australia as prime examples of the diversification strategy in action. These agreements have already opened new avenues for Indian goods, from agricultural products and textiles to engineering goods and pharmaceuticals, often at preferential tariff rates that make them more competitive than in the US market.

Simultaneously, the report underscores the role of initiatives like the Production Linked Incentive (PLI) scheme. This is not just an import substitution plan but a long-term vision to embed India into global value chains for sophisticated goods like electronics, automotive components, and specialty steel. The goal is to create export-oriented manufacturing hubs that are resilient to single-market shocks. The report’s subtext is unambiguous: India will not engage in a tit-for-tat tariff war but will instead focus on building structural advantages and forging new alliances.

Implications for Indian Import-Export Professionals

For the Indian exporter, this high-level strategy must be translated into ground-level action. The report isn't just an economic forecast; it's a roadmap. Here are the key takeaways and actionable implications for your business:

• De-Risk Your Market Portfolio: The 55% statistic is a wake-up call. Over-dependence on the US market is now a documented strategic risk. It's imperative to actively explore and enter new markets. The low-hanging fruit are countries where India has an FTA. Conduct market research for your specific HS codes in the UAE, Australia, and keep a close watch on the progress of negotiations with the UK and the EU.
• Master the FTA Playbook: Signing an FTA is the government's job; leveraging it is yours. This means going beyond the headlines. Invest time in understanding the specific Rules of Origin criteria for your products to qualify for tariff benefits. Utilise government portals and export promotion councils to get detailed guidance on documentation and compliance for these new markets. The competitive edge you lose to a US tariff can be regained and surpassed with a zero-duty advantage in a new market.
• Re-evaluate Your US Strategy: For businesses where the US remains an indispensable market, the strategy must shift from volume to value. Can you move up the value chain to offer products that are less price-sensitive? Explore niche segments or product customisations that can absorb tariff pressures. Additionally, conduct a thorough review of your product classifications to ensure you aren't being subjected to higher tariffs unnecessarily and explore any available tariff exclusion processes.
• Tap into the Domestic 'Global' Supply Chain: The PLI scheme is creating massive manufacturing champions within India. These companies will require a robust ecosystem of domestic suppliers for components and raw materials. Position your business as a potential partner in these emerging value chains. Becoming a supplier to a PLI-backed electronics or auto giant is an indirect way to participate in a globally competitive export ecosystem, with reduced direct exposure to international tariff risks.
• Invest in Digitalisation and Market Intelligence: The hunt for new markets and the complexity of new trade agreements require superior data and tools. Invest in digital platforms for market intelligence, B2B matchmaking, and streamlined logistics and compliance management. In a diversified trade world, information is your most valuable commodity.
• Focus on Non-Tariff Competitiveness: In any market, tariffs are only one part of the equation. Double down on a 'Made in India' brand built on quality, reliability, and innovation. Superior product quality, consistent delivery schedules, and excellent post-sales service can create a 'stickiness' with buyers that often transcends moderate price disadvantages caused by tariffs.

The Way Forward: From Challenge to Catalyst

The latest government analysis confirms what many in the trade have been feeling: the global landscape is irrevocably altered. The US tariffs, while challenging, are acting as a powerful catalyst, forcing a much-needed strategic realignment in India's trade policy and, by extension, for its exporters.

The message is not to abandon established markets but to build a more balanced, resilient, and diversified export portfolio. The era of relying on a single anchor market is over. The future belongs to the Indian exporter who is nimble, informed, and views the world map not as a set of risks to be managed, but as a portfolio of opportunities to be seized. The government is opening new doors with its FTA strategy; it is now up to the enterprise and ingenuity of Indian businesses to walk through them.

Source: Original