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India Diversifies Exports as US Tariffs Bite, Shifting Trade Flows Eastward

Indian exporters are actively diversifying their markets to mitigate the impact of steep US tariffs, which reached 50% in 2025. Key sectors like marine products, electronics, and gems are already shifting exports to destinations like China, Thailand, and the UAE. While the US remains a critical market, data shows a clear moderation in shipments there and growth to the rest of the world. The report emphasizes that deeper integration into global supply chains and competitive logistics are vital to insulate the economy until a formal trade deal is secured.

Key Points: India Diversifies Exports to Counter High US Tariffs

  • US tariffs hit 50%
  • Exports pivot to China & UAE
  • Marine & electronics lead shift
  • Supply chain integration key
3 min read

Indian exports shift strategy toward diversification to offset US tariff impact: Report

Indian exporters are pivoting to new markets like China, UAE, and Hong Kong after US tariffs hit 50%, driving a strategic shift in trade flows.

"the beginning of the substitution effect has already started taking shape. - Bank of Baroda Report"

New Delhi, January 2

Indian exporters have begun a strategic shift toward market diversification as a primary mechanism to counter the impact of significantly higher US tariffs and the absence of a formal trade deal. According to a report from the Bank of Baroda, this transition follows a period of rapid frontloading of shipments earlier in 2025 as businesses sought to secure cost advantages before new trade barriers took effect.

The report identifies a structural change in India's export profile, specifically highlighting two distinct phases influenced by US policy shifts. Following the US tariffs announcement on April 2, 2025, exports to the US surged by USD 6 billion during the April-August period compared to the previous year. This spike occurred while older tariff rates of 0.5 per cent to 10 per cent remained in place.

However, the environment changed on August 7 when a 25 per cent tariff rate was implemented, followed by an increase to 50 per cent on August 27. The latter included a 25 per cent penalty linked to India's status as a major buyer of Russian oil.

The report noted in the report that while the US remains a critical market, the subsequent September-November period showed a "degree of diversification with exports to the rest of the world excluding the US picking up and some trimming down of exports to the US."

The report data indicate that during this second phase, exports to the rest of the world grew to USD 89.9 billion from USD 86.2 billion in the prior year, while the US-bound shipments saw a slight moderation. This shift suggests that "the beginning of the substitution effect has already started taking shape."

Sector-specific data reveal that marine products, electronic goods, and gems and jewellery are leading this diversification. For marine products, the US market share fell by 13.6 per cent in the September-October period, while the share of exports to China and Thailand rose to 20.6 per cent and 7.3 per cent, respectively.

Similarly, electronic goods saw a sharp increase in shipments to the UAE, with its share rising to 15.3 per cent from 8.8 per cent. The report also highlights that Hong Kong has become a significant destination for gems and jewellery, with its export share reaching 11 per cent.

The report emphasises that certain sectors, including readymade garments, textiles, and machinery, require further country-wise diversification to "negate the impact of any loss in output from higher tariff rates."

Average monthly exports to the US dropped to USD 5.9 billion in September-October 2025, down from USD 8.1 billion during the April-August period.

The report concludes that while individual market shares may currently be small, a focus on "integration with global supply chains, competitive pricing and improved logistics" may help insulate the Indian economy from output losses until a formal trade agreement is established.

- ANI

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Reader Comments

P
Priyanka N
The 50% tariff is very harsh, especially the part linked to Russian oil. It feels like economic coercion. While diversification is good, the government must also push harder for a fair trade deal. Our businesses shouldn't suffer for geopolitical decisions.
A
Aman W
Good to see sectors like electronics and gems adapting quickly. The shift to UAE and Hong Kong makes perfect sense. But the report is right, we need to do more in textiles and garments. Lots of small businesses there are very vulnerable.
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Sarah B
Interesting data. The front-loading before August shows how businesses were scrambling. The real test is long-term sustainability. Improving logistics and supply chain integration is key, not just finding new markets.
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Vikram M
This is the right strategy. Atmanirbhar Bharat should also mean having diverse global customers. We have the products, we just need to market them better worldwide. Hope this makes our export sector more resilient in the long run.
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Karthik V
While I support diversification, I have a respectful criticism. The report mentions "competitive pricing". Are we just going to be the low-cost alternative everywhere? We should focus on building brand India for quality, not just cheap goods.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

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