The findings of GTRI highlight that tariff shocks, if left unaddressed, could erode India’s export competitiveness and undo years of trade gains.
India’s challenge now lies in combining diplomatic outreach with domestic policy relief to cushion exporters and reclaim lost market share.
Without swift action, the tariff-driven slowdown risks deepening job losses and weakening the momentum of India’s manufacturing revival.
India’s export sector witnessed the steepest decline in recent years, triggered by the aggressive reciprocal and punitive tariffs imposed by the US, a research report showed. India’s exports to the US, the largest export destination for New Delhi, plunged 37.5% between May and September, think tank Global Trade Research Initiative (GTRI) said.
The US imposed tariffs at a baseline of 10% in April, followed by 25% in early August, and a punitive tariff of 25% for India’s purchase of Russian oil. This brought the total tariffs on India to 50% by the end of August. The effects of these tariffs were felt across markets, sectors, and industries immediately. Within five months, India’s exports to the US fell to $5.5 billion from $8.8 billion.
Tariff-Free Goods Take the Hardest Hit
Contrastingly, tariff-free products, which account for almost one-third of Indian exports, were the hardest hit by the tariffs. Tariff-free goods fell 47% to $1.8 billion in September from $3.4 billion in May. Smartphone exports witnessed the biggest casualty, according to the GTRI report. Smartphone shipments, which surged 197% between April and September a year ago, tumbled 58% to just $884.6 million from $2.29 billion in May.
“Shipments fell month after month — $2.0 billion in June, $1.52 billion in July, $964.8 million in August, and finally $884.6 million in September. The reasons for the decline are not known and need examination,” the report added.
Pharmaceuticals Take the Brunt Too
Like smartphones, pharmaceutical products are also tariff-free. However, pharmaceutical product exports fell 15.7%. Pharmaceutical shipments, which stood at $745.6 million in May, fell to $628.3 million in September, despite being a beneficiary of India’s production-linked incentive (PLI) manufacturing schemes. Both the pharma sector and the smartphone sector saw a disproportionate fall.
Metals Remain Unmalleable to Uniform Tariffs
According to the research report, industrial metals and auto parts, which are subjected to uniform tariffs for all countries, posted only a milder decline of 16.7%, to $0.5 billion from $0.6 billion. Since all countries faced similar tariffs on these goods, the fall was linked more to the general slowdown in US industrial activity than to any loss in Indian competitiveness, the report said. Aluminum exports fell 37%, while copper and auto parts fell 25% and 12%, respectively. Iron and steel exports fell 8%.
US Tariffs Crumble Labour-Intensive Sectors
Key sectors involving labour intensity, such as textiles, gems and jewellery, chemicals, agri-foods, and machinery, saw a 33% decline. These sectors, which constitute nearly 60% of India’s exports to the US, fell to $3.2 billion in September from $4.8 billion in May, the report showed.
Sectoral Impacts of the US Tariffs
Gems and Jewellery: Exports of gems and jewellery tumbled 59.5%, from $500.2 million to $202.8 million, as units in Surat and Mumbai lost US orders to Thailand and Vietnam. “Cut and polished diamonds dropped 54%, while lab-grown diamond exports plunged 89%,” the report showed.
Textiles and Garments: Exports of textiles, garments, and made-ups declined 37%, from $944 million to $597 million. Garments alone fell 44%, within which knitted apparel was down 39%, woven apparel fell 50%, and girls’ suits fell 66%. Meanwhile, home textiles fell 15%, and yarn and fabrics plunged 41%.
Chemicals: Chemical exports contracted 35%, from $537 million to $359 million, driven by a sharp fall of 37% in agrochemicals and 44% in essential oils.
Marine and Seafood: Exports of marine and seafood posted a decline of 49%, from $223 million to $113 million, the biggest hit to one of the most labour-intensive sectors in the country. Coastal hubs such as Nellore, Bhimavaram, Kakinada, Paradeep, Veraval, and Porbandar have been struck hard as buyers look at alternative exporters, including Ecuador and Vietnam.
Agriculture and Processed Food: The agri sector posted a broad-based slump, with processed fruits and vegetables falling 44%, roots and tubers declining 45%, followed by a 27% fall in preparations of cereals and a 59% fall in dairy and honey. Processed food fell 35%, coffee and spices shrank 40%, while resins and cocoa products fell 61% and 99%, respectively. The tariffs wiped out two years of steady gains and severely hit agriculture export-heavy states such as Kerala, Karnataka, Jharkhand, Chhattisgarh, and Gujarat.
Way Forward: Need for Targeted Relief
Exporters have sought immediate relief plans from the government and prioritised measures including enhanced interest equalisation support to lower financing costs, faster duty remission to ease liquidity pressure, and emergency credit lines for micro, small, and medium enterprise (MSME) exporters.
“Without urgent intervention, India risks losing market share to Vietnam, Mexico, and China — even in sectors where it previously held a strong position,” the GTRI report said. “...Tariffs have not only squeezed India’s trade margins but also exposed structural vulnerabilities across key export industries.”
According to a report by India Today, New Delhi should prioritise lowering tariffs and non-tariff barriers in sectors where India can maximise job creation. “Slash tariffs rapidly on labour-intensive goods such as apparel, footwear, leather, furniture, toys, and marine products to well below levels for China and Vietnam,” the report said. The report also highlighted that a free trade agreement with the US could create over 5 million direct and indirect jobs over the next decade. For India, the message is clear; competitiveness alone won’t suffice unless matched by smart diplomacy and timely policy response.
