Indian exporters redirecting shipments to new markets amid steep US tariffs: Report

Indian exporters are increasingly redirecting shipments to alternative global markets as a strategic response to sharply higher US tariffs and the lack of a bilateral trade agreement, according to a report by Bank of Baroda. The shift follows an earlier phase in 2025 when exporters accelerated shipments to the US to take advantage of lower duty rates before tougher trade measures came into force.

The report points to a clear change in export trends shaped by successive US tariff actions. After Washington announced new tariffs on April 2, 2025, Indian exports to the US rose sharply, increasing by about $6 billion during the April–August period compared with the previous year. This surge took place while older tariff levels of 0.5% to 10% were still applicable. The situation altered significantly in August, when a 25% tariff was imposed on August 7, followed by a further hike to 50% on August 27. The latter included an additional penalty linked to India’s continued purchases of Russian crude oil.

While the US continues to be a key destination, the report notes that export patterns shifted in the September–November period. During this phase, shipments to markets outside the US gained momentum, while exports to the US showed some moderation. Exports to the rest of the world rose to $89.9 billion from $86.2 billion a year earlier, indicating what the report describes as the early signs of a “substitution effect”.

The diversification trend is particularly visible in certain sectors. In marine products, the US share of exports fell by 13.6% during September–October, even as exports to China and Thailand increased, accounting for 20.6% and 7.3% of shipments, respectively. Electronic goods exports recorded a strong rise to the UAE, whose share climbed to 15.3% from 8.8%. In the gems and jewellery segment, Hong Kong has emerged as a major destination, accounting for 11% of exports.

However, the report cautions that sectors such as readymade garments, textiles and machinery still need broader country-level diversification to offset potential output losses from higher US tariffs. Reflecting the impact of the new duties, average monthly exports to the US declined to $5.9 billion in September–October 2025, compared with $8.1 billion during April–August.

The report concludes that although alternative markets currently account for relatively smaller shares, deeper integration into global supply chains, sharper pricing competitiveness and improvements in logistics could help cushion the Indian economy against export losses until a formal trade agreement with the US is in place.