Rising US tariffs push Indian exporters toward UAE, China, and European markets

High US Tariffs Push India to Diversify Exports to UAE, China, and Europe

Shipments to new markets like UAE, China, and Spain show growth, but heavy dependence on the US remains a key challenge.

India’s exporters are swiftly pivoting to alternative markets such as the United Arab Emirates (UAE), China, Spain, and Italy as high tariffs imposed by the United States weigh on key export categories. According to official trade data, India exported goods worth $86.51 billion to the US in FY25, but the recent 50 percent tariff rates have sharply reduced shipments in several sectors, prompting a redirection of trade flows.

US tariffs weigh on India’s export performance

India’s exports to the US fell 21 percent from August and nearly 12 percent year-on-year to $5.4 billion in September. The decline was most visible in labour-intensive sectors such as textiles, marine products, gems and jewellery, and leather goods—categories that have historically driven India’s export growth.

Exports of cotton garments and related accessories, among the top shipments to the US, dropped 25 percent from a year earlier and 34 percent from the preceding month. In contrast, shipments of these products to Italy rose 15 percent month-on-month and doubled year-on-year, according to the Commerce Ministry’s data.

Similarly, marine product exports to the US fell nearly 27 percent year-on-year, though they posted a modest month-on-month growth of under 2 percent. Meanwhile, exports of the same category to China surged 60 percent year-on-year and 65 percent sequentially, showing clear signs of trade redirection.

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Diversification helps cushion tariff shock

Sectors like gems and jewellery, along with leather goods, have also begun diversifying export destinations amid the tariff disruption. Exports of gold and other precious metal jewellery to the US fell 71 percent year-on-year and 54 percent month-on-month, but shipments to the UAE increased nearly 27 percent sequentially.

These trends have collectively supported a 3.6 percent rise in India’s overall merchandise exports, which touched $36.38 billion in September. On a yearly basis, outbound shipments were up 6.7 percent, indicating that diversification is helping India maintain export momentum despite external pressures.

Experts highlight growing trade resilience

According to Garima Kapoor, Chief Economist at Elara Capital, the redirection of export channels is a positive sign of resilience.

“Exports to Spain, the UAE, China, and Bangladesh have registered steady sequential gains, signalling a partial redirection of trade channels amid tariff-induced disruptions,” Kapoor noted.

Trade data shows Indian exports to UAE rose 24 percent, Spain 151 percent, China 34 percent, Bangladesh 23 percent, and Egypt 67 percent in September compared to the same month last year.

Industry leaders believe such diversification is vital for long-term export sustainability. SC Ralhan, President of the Federation of Indian Export Organisations (FIEO), emphasized that while the US remains India’s largest export destination, there is significant untapped potential elsewhere.

“With well-targeted export promotion strategies and market diversification efforts, India can deepen its global footprint and reduce overdependence on a few markets,” Ralhan said.

He highlighted that apart from the US and UAE, India’s top trading partners include the Netherlands, China, the UK, and Germany. However, emerging opportunities in Latin America, Africa, and ASEAN countries could play a critical role in offsetting losses from traditional markets.

Heavy dependence on the US still a concern

Despite these encouraging signs, exporters caution that the diversification drive may not fully offset the impact of high tariffs. The US continues to be India’s largest trading partner, and goods worth $48.2 billion are now subject to steep 50 percent tariffs since August 27.

Exporters fear that a prolonged tariff regime could hurt long-term contracts and supply chains, especially for labour-intensive sectors that rely on steady US demand. The government’s internal assessments also suggest that the tariff impact may persist through the next two quarters, although the ongoing shift to alternative destinations is expected to soften the blow.

Looking ahead: Building sustainable trade networks

India’s trade diversification strategy is now focused on strengthening ties with emerging markets and leveraging trade agreements. The India-UAE Comprehensive Economic Partnership Agreement (CEPA) and growing cooperation with ASEAN and European nations could help exporters secure stable markets in the medium term.

While the path ahead remains challenging, experts believe that India’s proactive export strategies—supported by government incentives, logistics upgrades, and production-linked schemes—could help exporters navigate tariff disruptions and expand into new territories.

As the trade landscape continues to evolve, India’s ability to balance between traditional partners like the US and emerging markets in Asia, Africa, and Europe will determine the resilience and growth of its export ecosystem in FY25 and beyond.

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