India’s export sector is in the midst of a deliberate pivot away from its heavy reliance on the US market, after the imposition of steep tariffs by the US government that apparently threatened large parts of Indian merchandise shipments. Data show that Indian goods worth approximately US $48.2 billion have been exposed to US tariffs of nearly 50 per cent, with effect from August 27. In FY 2024-25 India exported goods amounting to US $86.51 billion to the US, of which the top five export categories alone accounted for almost US $60 billion.
Given this significant exposure, the sharp tariff increase has triggered a recalibration in export markets. The data indicate that in September the total merchandise exports rose to US $36.38 billion, a year-on-year jump of 6.7 per cent, even though shipments to the US in that month fell nearly 12 per cent to about US $5.4 billion. This contrast highlights how Indian exporters are facing headwinds in their traditional US market but are finding incremental avenues elsewhere.
Labour-intensive and traditional export categories have borne the brunt of the tariff shock. Exports of cotton garments and related accessories to the US dropped about 25 per cent year-on-year and 34 per cent from the previous month. Marine products, another key Indian export to the US, fell nearly 27 per cent year-on-year in September. However, while traditional shipments to the US slid, exports to alternate markets posted robust gains. For instance, shipments of marine products to China rose by nearly 60 per cent year-on-year and by some 65 per cent sequentially. More broadly, Indian exports to the UAE rose 24 per cent, to Spain 151 per cent, to China 34 per cent, to Bangladesh 23 per cent and to Egypt 67 per cent in September over the same month last year. These numbers reflect a measured but visible diversification of destination markets.
The strategic logic is clear: when exposure to a single major destination comes under tariff stress, spreading the risk becomes imperative. While the US remains India’s largest export destination, the clear growth in shipments to the UAE, Spain, China and other markets suggests exporters are hastening the diversification. This shift in destination mix has helped Indian exports limit the impact of the US tariff shock. This adaptability is a positive sign.
Yet the situation is far from comfortable. For many Indian exporters, especially in labour-intensive sectors such as textiles, apparel, gems and jewellery, the US market has been deeply embedded. The steep drop in shipments to the US (nearly 12 per cent year-on-year in September) coupled with the large value of goods exposed to the tariff hike means the drag on export growth remains real. The article notes that because of the high tariff burden, the US remains a vulnerability and diversification alone is unlikely to fully offset the disruption.
Another important takeaway is that diversification is not just geographical but also product-oriented. With US tariffs targeted heavily at labour-intensive goods, the incentive is strong for Indian exporters to shift toward other destinations or other product categories less exposed to such punitive duties. That India’s total merchandise exports rose in September (despite the US setback) suggests this strategic adjustment is having some effect.
India’s export playbook is being rewritten under external pressure: the tariff challenge from the US is forcing exporters to diversify destinations and rethink product composition. The early data indicate that markets like the UAE, China, Spain, Egypt and others are absorbing more Indian shipments, reducing over-dependence on the US. However, the transition will take time, given the scale of the US market and its embedded nature in India’s export architecture.
