High US tariffs push Indian exporters toward UAE, China, and Europe

Steep US tariffs of up to 50 percent have dented India’s exports to its largest trading partner, prompting exporters to pivot swiftly toward alternative markets such as the United Arab Emirates (UAE), China, and Europe.

According to official trade data, India’s merchandise exports to the United States fell 21 percent month-on-month and 12 percent year-on-year in September to $5.4 billion, as labour-intensive sectors bore the brunt of the tariff hike.

Among the hardest-hit were cotton garments and accessories, a key export category, which plunged 25 percent from a year earlier and 34 percent from August. However, Indian exporters successfully redirected part of this trade — shipments of cotton apparel to Italy jumped 15 percent over August and more than doubled compared with September 2024.

A similar shift was visible in marine exports, another major category affected by the tariffs. While shipments to the US slumped nearly 27 percent year-on-year, exports to China surged 60 percent annually and 65 percent sequentially, with Thailand, Vietnam, and Belgium also recording strong gains.

The gems and jewellery sector showed early signs of diversification too. Exports of gold and other precious jewellery to the US tumbled 71 percent year-on-year and 54 percent month-on-month, while shipments to the UAE climbed 27 percent from August. Leather goods followed a similar pattern, reflecting exporters’ agility in finding new markets amid shifting trade conditions.

These adjustments helped India’s overall goods exports grow 3.6 percent month-on-month in September to $36.38 billion, and 6.7 percent year-on-year, despite the hit from the US market.

Data shows that in September, India’s exports to the UAE rose 24 percent, to Spain 151 percent, to China 34 percent, to Bangladesh 23 percent, and to Egypt 67 percent year-on-year — evidence of a growing pivot toward emerging and non-traditional markets.

However, exporters caution that diversification alone may not fully offset the impact of the steep tariffs, given the size of India’s trade exposure to the US. The government estimates that Indian exports worth $48.2 billion are now subject to the 50 percent duty imposed from August 27.

In FY25, India’s exports to the US stood at $86.51 billion, with the top five product categories accounting for nearly $60 billion of that total — underscoring both the scale of the challenge and the urgency of India’s ongoing market diversification strategy.