India’s exports to the United States have experienced a significant decline, with a remarkable 20% drop recorded in September alone. Over the last four months, this decline has escalated to nearly 40%. The decrease aligns with the implementation of hefty tariffs by the US, which began on August 27.
Impact of US Tariffs on Indian Exports
The tariffs consist of a 50% overall charge, which includes a 25% penalty due to India’s continued oil imports from Russia. According to Ajay Srivastava from the Global Trade Research Initiative (GTRI), the US has emerged as India’s hardest-hit market amid the current tariff environment.
Trade Statistics
Recent figures reveal a stark downturn in shipments, with exports plummeting from $8.8 billion in May to $5.5 billion in September. This results in an overall decline of approximately 37.5% over four months.
- May Exports: $8.8 billion
- September Exports: $5.5 billion
- Total Decline: 37.5%
Additionally, this drastic fall has contributed to an expanded trade deficit, which reached a 13-month high of $32.15 billion in September. The downturn has been most significantly felt in labor-intensive sectors, including:
- Textiles
- Gems and Jewelry
- Engineering Goods
- Chemicals
Ongoing Trade Negotiations
Despite these challenges, trade discussions between India and the US have resumed following several months of inactivity. An Indian delegation is presently engaged in talks within the US, working towards a trade agreement targeted for completion next month.
During a recent statement, former President Trump indicated that Indian Prime Minister Narendra Modi has expressed a willingness to decrease Russian oil imports. This move aligns with US efforts to impose economic pressure on Russia amid ongoing geopolitical tensions related to the war in Ukraine.
However, significant obstacles in the negotiations remain. Key issues include:
- Access to the agricultural sector
- Dairy product regulations
For years, the US has sought greater access to India’s agricultural market, viewing it as an expansive opportunity. Yet, India has consistently prioritized its food security and the welfare of its small farmers.
Future Outlook
Historically, the US was India’s largest trading partner, with bilateral trade reaching $190 billion in 2024. Both Trump and Modi have set an ambitious target to increase this figure to $500 billion. The road to achieving this goal may hinge on resolving the remaining trade disputes and rebuilding trust in the face of recent tariff escalations.
