Tariff-Free but Still Falling: India’s US Exports Down 22% in 4 Months, Smartphones Lead the Slump

India's exports to the US, its largest trading partner, fell 22.2% between May and August this year, driven most notably by tariff-exempt sectors. A recent report from the New Delhi-based trade policy think tank Global Trade Research Initiative, or GTRI, Indian shipments to the US dropped from $8.8bn to $6.9bn during the period, as tariffs on many products surged from 10% to as high as 50%.

"Tariff-exempt exports shrank the most, down 41.9%, with smartphones collapsing 58% to just $965mn despite facing zero duty in the US," the report noted.

Before higher tariffs hit Indian goods entering the US, Singapore-based research agency Canalys highlighted that the share of smartphones manufactured in India in US imports climbed to 44% during the April-June 2025 quarter, a sharp rise from 13% in the same quarter of 2024.

The data comes as Commerce and Industry Minister Piyush Goyal visits the US this week to meet United States Trade Representative (USTR) Jamieson Greer on the sidelines of the United Nations General Assembly in New York. Trade talks and a possible agreement are expected to feature prominently in the discussions.

India–US trade has otherwise been on an upward trajectory. In FY25, bilateral trade between India and the US reached a record $132.2bn, up from $119.71bn in FY24. In FY25, India had a trade surplus of $40.82bn with the US as well.

Sustained Decline in Tariff-Free Exports

The GTRI report stresses that the recent fall is not a one-off but coincides directly with Washington’s steep tariff hikes—from 10% until early August, to 25% after 7 August, and finally to 50% by the end of the month.

Noteworthy that tariff-free products, which account for 28.5% of India’s August exports, posted the sharpest contraction of 41.9%, falling from $3.37bn in May to $1.96bn in August, it added.

Smartphones, India's largest export to the US, dropped significantly by 58% from $2.29bn in May 2025 to $964.8mn in August. The fall was steady month by month as in June it was at $2bn, followed by $1.52bn in July and then the sharpest drop in August.

"We need to find out the reasons for falling exports to the US. Is production shifting back to China or Vietnam for newer models, or have Component shortages hit Indian assembly plants?" Ajay Srivastava, founder of GTRI, asked.

Likewise, Pharmaceuticals also weakened, with exports dropping 13.3%, from $745mn in May to $646.6mn in Aug 2025. GTRI flagged these trends as alarming and counterintuitive.

Labour-Intensive Sectors Bear the Brunt

The 50% tariff hit India's labour-intensive sectors particularly hard. They account for 62.7% of New Delhi's exports to Washington. Their shipments fell 10.8%, from $4.82bn in May to $4.30bn in August 2025.

Jewellery exports were down 9.1% to $228.2mn. Within this, Diamond-studded gold jewellery dropped significantly by 25.5% and cut and polished diamonds also fell 15.2% to $164.2mn, putting pressure on Surat’s diamond industry, the report said.

India is also at risk of losing the solar panel market to China and Vietnam. Exports of panels already fell by 34.6% during the period from $202.6mn to $132.4mn. China and Vietnam currently enjoy only 30% and 20% tariffs, respectively, as compared to India's 50%.

Seafood shipments also tumbled 43.8%, from $289.7mn to $162.7mn, threatening jobs in coastal processing hubs.

India’s textile, garment and made-up exports to the US fell 9.3%, sliding from $943.7mn in May 2025 to $855.5mn in August 2025.

Chemical exports fell 15.9% to $451.9mn between May and August 2025. The sharpest contraction was seen in agrochemicals, insecticides, and herbicides, which plunged 26.7% to $77.5mn.

Agricultural goods saw a broad-based decline as well. Processed food, sugar and cocoa preparations fell 13.9% to $77.2mn; cereals slipped 7.2% to $32.5mn; dairy products fell 31.1% to $16.8mn; and edible oil exports crashed nearly 70% to just $8.2mn.

It is worth noting, however, that August trade data only partially reflects the impact of the steepest tariff hike, which came into effect on 28 August.

"September will be the first full month where all Category C exports face 50% tariffs, meaning the declines in textiles, gems and jewellery, shrimp, chemicals, and solar panels could deepen further," Srivastava warned.

Limited Bright Spots

Despite the sweeping declines, a few sectors appear less exposed. Metals and auto components fell only 4%, from $630mn in May to $600mn in August.

Within this, aluminium exports declined 19% to $83.1 million, while iron and steel slipped 13.1% to $43 million. Auto components were relatively resilient, down just 2% to $179.6 million.

According to GTRI, this resilience reflects the fact that tariffs in these sectors are uniformly applied across suppliers. The decline here is driven more by weaker US industrial demand than by a loss of competitiveness.