Goods trade gap narrows despite US tariffs

India’s merchandise exports rose by 6.7% in August 2025 to $35.1 billion, up from $32.89 billion in August 2024, even as exporters faced steep US tariffs. The trade deficit narrowed significantly, highlighting the resilience of Indian exporters and the impact of proactive government policies.

Despite the imposition of an additional 25% tariff by the US starting August 7—followed by another 25% secondary tariff from August 27—the US remained India’s largest export market. Exports to the US rose 7.15% year-on-year to $6.86 billion in August 2025, compared to $6.41 billion in the same month last year. Over the April–August 2025 period, exports to the US jumped 18.06% to $40.39 billion, up from $34.21 billion a year earlier.

Releasing the trade data, Commerce Secretary Sunil Barthwal praised exporters’ efforts and said government reforms have supported their performance amid global headwinds, including the Russia-Ukraine and Israel-Hamas conflicts and shifting global trade policies. He cited the government’s four-pillar strategy: domestic reforms such as GST rationalization, targeted export promotion, country- and product-specific trade diversification, and import substitution.

India’s broader import substitution strategy, a key part of the ‘Atmanirbhar Bharat’ initiative, also contributed to the narrowing trade gap. Merchandise imports in August 2025 dropped 10.1% to $61.59 billion, compared to $68.53 billion in August 2024. A major contributor to this decline was a steep 56% fall in gold imports, which fell to $5.44 billion from $12.55 billion the previous year.

As a result, India’s merchandise trade deficit shrank to $26.49 billion in August 2025, from $35.64 billion in August 2024.

The US, while remaining India’s top export destination, saw a sharp 18.22% decline in its exports to India in August 2025, falling to $3.60 billion from $4.41 billion in August 2024. However, cumulative US exports to India from April to August 2025 still grew by 8.54% to $21.61 billion, up from $19.91 billion in the same period last year.

Overall exports (including merchandise and services) rose by 9.34% in August 2025 to $69.16 billion, compared to $63.25 billion in August 2024. Total imports fell nearly 7% to $79.04 billion, from $84.99 billion a year earlier. This brought down the overall trade deficit to $9.88 billion, significantly lower than the $21.73 billion recorded in August 2024.

Note: The services export figures for August 2025 are provisional estimates based on earlier trends, as the Reserve Bank of India releases services trade data with a time lag.