US Tariffs on Indian Exports: Challenges, Relief Measures, and New Market Pathways
The trade relationship between India and the United States entered a turbulent phase on 27 August 2025, when the US government doubled tariffs to 50% on a wide range of Indian exports. This move has significant implications for Indian businesses, particularly in labour-intensive sectors. At the same time, India is responding with relief measures, long-term export promotion strategies, and a clear push to diversify markets.
This article unpacks the developments, their impact on exporters, and how businesses can respond strategically.
The US Tariff Hike: What’s Affected?
The 50% tariff hike covers several key product categories:
Textiles: Roughly 28–29% of India’s textile exports are shipped to the US. This sector faces immediate pressure, with renegotiations and potential order cancellations likely.
Footwear, Chemicals, Leather, and Gems: These industries are also hit, with exporters needing to factor in reduced competitiveness in US markets.
Pharmaceuticals and Petroleum: These remain exempt for now, preserving two of India’s largest export categories to the US.
Implication for exporters: Increased landed cost makes Indian products less attractive in the US compared to suppliers from tariff-exempt countries. Exporters must weigh whether to absorb part of the cost, pass it on to buyers, or pivot to alternative markets.
Relief Measures: DGFT Intervention
In response, the Directorate General of Foreign Trade (DGFT) announced a significant relief measure:
Export obligation period for chemical, petrochemical, and pharmaceutical exporters extended from 6 months to 18 months.
This provides breathing room for exporters, helping them manage supply cycles, secure raw materials, and reduce financial strain.
Action Point: Exporters in these sectors should update their DGFT records, revise shipment planning, and rework cash flow projections accordingly.
Export Promotion Mission 2025–2031
The government launched a ₹25,000 crore Export Promotion Mission, running until 2031, with three core focus areas:
Supporting MSME competitiveness.
Strengthening branding and logistics infrastructure.
Expanding India’s export outreach to 40 priority countries.
Despite the tariff shock, India’s exports in July 2025 grew by 7.29% year-on-year, reaching USD 37.24 billion. However, the trade deficit widened to USD 27.35 billion, an eight-month high.
Diversification: Reducing Overdependence on the US
India is accelerating efforts to reduce reliance on the US market. Current strategies include:
Expanding exports to Russia, Brazil, the Netherlands, and the UK.
Fast-tracking negotiations with the EAEU, Oman, Sri Lanka, Peru, Chile, and New Zealand.
Finalizing the India–UK Free Trade Agreement, expected to soften the blow for textile exporters by opening tariff-free access to UK buyers.
Opportunity: With the US tariffs pricing out competitors like Bangladesh, Cambodia, and Indonesia, Indian exporters may still capture market share in textiles, provided they can maintain compliance and deliver consistent quality.
Strategic Outlook for Exporters
To navigate this shifting environment, exporters can adopt a structured approach inspired by the Reverse Sourcing Method (RSM):
Product Mastery: Focus on cost-competitive, certified product ranges (textiles, leather, chemicals) while ensuring consistent quality.
Market Genius: Prioritize “growing markets” such as Russia and Brazil, where Indian suppliers are gaining traction.
Legal Know-How: Update Certificates of Origin and compliance documentation to maximize FTA benefits.
Marketing Strategy: Position India as a reliable supply alternative for US buyers seeking to diversify away from China.
Sales Conversion: Use tariff changes as negotiation leverage with buyers, highlighting India’s resilience and compliance strengths.
After-Sales: Build repeat orders in alternative markets to stabilize export revenue streams.
Key Takeaways
The 50% US tariff hike is a major disruption, especially for textiles, footwear, leather, gems, and chemicals.
Relief has come via DGFT’s extension of export obligation timelines, providing temporary support.
India is investing in long-term export promotion through a ₹25,000 crore mission, with MSMEs at the center.
Diversification is no longer optional: Russia, Brazil, the UK, and upcoming FTA partners are essential markets.
Exporters must align product, compliance, and marketing strategies to adapt to the new trade environment.
Conclusion
The US tariff hike underscores the vulnerability of overdependence on a single market. But it also presents a chance for Indian exporters to reposition globally, capture new buyers, and strengthen long-term resilience. Those who act quickly—by diversifying markets, aligning with FTAs, and sharpening their compliance—will be best placed to weather the storm and thrive in a multipolar trade landscape.
