By Sanskriti Global Exports by Himanshu Gupta

Navigating the Storm: US Tariff Shock Sees Indian Exports Plunge 28.5%

Introduction

For years, the narrative surrounding the US-India trade relationship has been one of strategic convergence and burgeoning partnership. The United States remains India's largest trading partner, a crucial destination for a vast array of Indian goods. However, a recent report from the Global Trade Research Initiative (GTRI) has sent a chilling shockwave through the Indian export community, sounding an alarm that can no longer be ignored. The headline figure is stark: a staggering 28.5% crash in Indian exports to the US, attributed to what the think tank calls a "tariff shock." This development not only threatens the bottom line of countless businesses but also challenges the very foundation of this critical economic corridor. As senior professionals in the import-export domain, it is imperative that we dissect this report, understand its deep-seated implications, and chart a strategic course forward.

Unpacking the 'Tariff Shock': Key Findings from the GTRI Report

The GTRI's findings paint a concerning picture of India's position in the US market. The report moves beyond general trade statistics to pinpoint a specific and acute problem: the escalating tariff burden on Indian products. This isn't a single, new blanket tariff, but rather the cumulative and intensifying effect of various trade defence measures, including countervailing duties (CVDs) and anti-dumping duties (ADDs), which are being applied more frequently and across a broader range of products.

The core of the issue, as highlighted by the GTRI, is the suddenness and severity of these duties. This has led to a situation where Indian goods, once competitively priced, are now among the most heavily taxed imports in the United States. To put this into perspective, the report notes that the effective tariff rate on certain Indian goods is now approaching the levels faced by China—around 30%—a country that has been in a prolonged and overt trade conflict with the US. This places India at a significant disadvantage compared to other partners like Japan or trade bloc members like Mexico and Canada, who enjoy far more favourable terms.

Critically, the GTRI warns that the pain is not being felt evenly. The sectors hit hardest are the very backbone of India's employment landscape: labour-intensive industries. These include textiles and apparel, leather goods, gems and jewellery, and specific categories of processed foods and engineering goods. For these sectors, which employ millions of skilled and semi-skilled workers, the high tariffs act as a non-negotiable barrier, making them uncompetitive overnight and jeopardizing long-standing supply chains.

In response to this crisis, the report urges the Indian government to engage in "quick policy action." This is a call not for reactionary measures, but for a swift, strategic, and multi-pronged response involving diplomatic engagement, policy support for affected industries, and a re-evaluation of our trade dependencies.

Implications for Indian Import-Export Professionals

The GTRI report is more than just an academic analysis; it's a direct reflection of the challenges you are facing on the ground. Understanding the specific implications is the first step toward building resilience.

• Immediate Erosion of Profitability and Orders: The most direct impact is on your pricing. A 20-30% tariff cannot be easily absorbed. Exporters are forced to either increase prices, risking being priced out by competitors from Vietnam, Mexico, or Bangladesh, or slash their already thin margins. US buyers, facing this price hike, are likely to reduce order sizes, delay shipments, or cancel contracts altogether in search of more stable and cost-effective suppliers.
• Heightened Vulnerability of MSMEs: While large corporations may have the resources to weather this storm, it is the Micro, Small, and Medium Enterprises (MSMEs) in sectors like handicrafts, apparel, and auto components that are most vulnerable. They lack the capital for protracted legal battles against trade duties and do not have the global footprint to easily pivot production or sales to other markets.
• Increased Compliance and Legal Overheads: The rise in trade defence investigations by the US Department of Commerce means Indian exporters must be prepared for intense scrutiny. Responding to anti-dumping and countervailing duty questionnaires is a complex, time-consuming, and expensive process requiring specialized legal counsel. The cost of compliance itself becomes a barrier to trade.
• Urgent Imperative for Market Diversification: This crisis underscores the risk of over-reliance on a single market, no matter how large. It is a powerful catalyst for accelerating diversification strategies. Exporters must now aggressively explore and cultivate markets in the European Union, the Middle East (especially the UAE and Saudi Arabia), Australia, and the ASEAN bloc, leveraging existing Free Trade Agreements (FTAs) where possible.
• Supply Chain Re-evaluation by US Buyers: Beyond individual orders, this tariff instability forces US companies to re-evaluate India's role in their global supply chains. They will actively seek to de-risk by adopting a "China Plus One Plus One" strategy, where India's position as a reliable alternative is now being questioned. This is a long-term strategic threat that requires rebuilding confidence.
• A Call for Proactive Industry-Government Collaboration: The GTRI's call for policy action must be a two-way street. Industry bodies and export promotion councils need to collate granular, sector-specific data on the impact of these tariffs and present a unified case to the Ministry of Commerce. This data is crucial for effective government-to-government negotiations and for designing targeted domestic support schemes like the Remission of Duties and Taxes on Exported Products (RoDTEP).

Conclusion: A Wake-Up Call for a Resilient Future

The GTRI's report of a 28.5% export crash is a sobering wake-up call. It signals an end to the era of assuming preferential treatment in the US market and the beginning of a new reality defined by heightened protectionism and fierce competition. Viewing this as merely a temporary setback would be a grave mistake. It is a structural shift that demands a fundamental rethink of our export strategy.

The path forward requires a dual approach. At the national level, India must engage in robust and persistent trade diplomacy with the United States, challenging unfair duties at the World Trade Organization (WTO) while simultaneously negotiating for more predictable trade terms. At the business level, the focus must be on agility, diversification, and unimpeachable compliance. Investing in market intelligence, exploring new geographies, and maintaining meticulous documentation are no longer best practices; they are survival imperatives.

The storm is here, but the Indian export community has weathered many before. By combining strategic government action with the inherent resilience and entrepreneurial spirit of our businesses, we can navigate these turbulent waters and emerge with a more diversified, robust, and sustainable export footprint for the future.

Source: Original