After the United States, under President Donald Trump, imposed sweeping tariffs on a large basket of Indian exports, India's trade outlook appeared gloomy. The tariffs, which climbed as high as 50% on August 27, 2025, impacted over half of India's exports to the US, including critical labor-intensive sectors such as textiles, gems and jewelry, marine products, and leather goods. Some sectors, like pharmaceuticals and electronics, were exempted.
Indian exports to the US have plunged sharply, by 37.5%, following the imposition of tariffs on most Indian goods, according to a report by the Global Trade Research Initiative (GTRI). The report showed that shipments to the U.S. fell 37.5% over four months, from USD 8.8 billion in May 2025 to USD 5.5 billion in September 2025, marking the sharpest and most sustained decline of the year.
Despite the inevitability of tariff impact on India's economy, the blow may not be too damaging, and India remains one of the few bright spots in an otherwise slowing global economy. The IMF's October 2025 World Economic Outlook (WEO) projects India's growth at 6.6% in FY26, up from 6.5% in FY25, before moderating slightly to 6.2% in FY27, signaling continued domestic momentum despite rising trade barriers.
A key strategy India is relying on to tackle Trump tariffs is to diversify its export market along with striking trade deals with various countries. This seems to have shown some result. As per a recent report by brokerage firm Elara Capital, India's exports performance remains resilient despite the recent 50% US tariff, with exports rising 6.7% YoY, led by sustained momentum in electronics, engineering goods, and marine products. In Q2FY26, exports recorded 9% YoY growth vs a 7% decline in the past year. Imports too rose 4% QoQ, marking good growth in Q2FY26 despite sluggish global demand. Overall, in H1FY26, merchandise trade deficit stood at USD 155bn vs USD 145bn.
Amid heightened trade tensions, analysts noted that Modi adopted a firm stance in response to punitive tariffs imposed by Trump, maintaining India's strategic autonomy and protecting key economic interests. Despite the imposition of a 50% tariff on select Indian exports, Modi refrained from making concessions, instead signaling India's intent to diversify partnerships by engaging with leaders such as President of Russia Vladimir Putin and General Secretary of the Chinese Communist Party Xi Jinping, and by pursuing closer trade ties with the European Union.
India's Ministry of External Affairs criticized the U.S. tariffs as unjustified and unreasonable, stating that India's imports of Russian oil were a necessary measure to ensure affordable energy for its 1.4 billion citizens amid global supply disruptions. The Ministry pointed out that, unlike India, the United States and the European Union maintained substantial trade with Russia without similar strategic necessity.
Government sources said that discussions between India and the United States on trade issues are "deeper and ongoing," with both sides working towards finding a "win-win solution". According to government sources quoted by ANI, engagement between India and the United States is continuing at multiple levels, with constructive discussions taking place.
India is reportedly planning to gradually reduce its Russian oil imports, a move influenced by US pressure and tariffs. While refiners await official directives, the government prioritizes stable energy prices and supply security.
The US remained India's largest trading partner for the fourth straight year in 2024–25, with bilateral trade at $131.84 billion ($86.5 billion exports). The US accounts for roughly 18% of India's goods exports, 6.22% of imports, and 10.73% of total merchandise trade, figures that underscore why both sides say they want to move quickly toward a deal. The proposed trade agreement aims to more than double bilateral trade to $500 billion by 2030, up from the current $191 billion.
