A steep fall in India’s exports to the United States has raised alarm bells across policy and industry circles, as a new report by the Global Trade Research Initiative (GTRI) reveals that the impact of U.S. President Donald Trump’s aggressive tariff hikes has been deeper and more widespread than anticipated — with even duty-free products witnessing a dramatic collapse.
Between May and August 2025, India’s goods exports to its largest trading partner declined by 22.2%, dropping from $8.8 billion to $6.9 billion. The downturn coincided with the U.S. government’s phased imposition of steep import tariffs — starting at 10%, then 25% from August 7, and reaching 50% by the end of the month.
“August data only partly reflects the 50% tariffs. September will be the real test — and the worst may be yet to come,” warned GTRI Founder Ajay Srivastava.
Shocking Declines in Tariff-Free Categories
Surprisingly, products exempt from U.S. tariffs — which made up nearly 28.5% of India’s exports in August — saw a massive 41.9% decline, from $3.37 billion in May to $1.96 billion in August.
Among the hardest hit was smartphones, India’s top export to the U.S., which fell by 58%, from $2.29 billion in May to $964.8 million in August. The decline has been steady month-on-month and has raised concerns over a potential shift in production back to China or Vietnam, or component shortages crippling India’s assembly units led by Foxconn and Tata Electronics.
“The sharp drop in duty-free segments is a puzzle. It suggests deeper issues like shifting supply chains, declining U.S. demand, or structural weaknesses in Indian manufacturing,” Srivastava said.
Sectoral Impact: The Numbers Tell the Story
Pharmaceuticals: Down 13.3% to $646.6 million.
Petroleum Oil: Slight rise of 0.6%, showing resilience.
Labour-Intensive Exports: Down 10.8% to $4.3 billion.
Gems & Jewellery: Overall drop of 9.1%, with cut and polished diamonds down 15.2%.
Solar Panels: Fell 34.6% amid stiff competition from Vietnam and China.
Shrimp Exports: Plummeted 43.8%, with Vannamei shrimp hit the hardest at -52.2%.
Textiles and Apparel: Decreased 9.3%, but home textiles saw a 14.2% boost.
Chemicals: Fell 15.9%, with agrochemicals seeing a 26.7% slump.
Agricultural Products: Dropped across the board; edible oils crashed nearly 70%.
Policy Concerns and Industry Demands
The export collapse — especially in sectors targeted by India’s Production Linked Incentive (PLI) scheme — is seen as a blow to India’s global manufacturing ambitions.
Industry associations are urging the government to:
Expand interest equalisation support to counter high U.S. tariffs.
Expedite duty remission payments to ease liquidity stress.
Offer financial assistance to labour-intensive sectors reeling from demand shocks.
While the government has moved to cut GST rates to boost domestic consumption, there is growing pressure for export-specific relief measures.
On the diplomatic front, trade talks remain deadlocked. “India must resist pressure on sensitive sectors like agriculture, dairy, GM feed, and regulatory autonomy. U.S. demands are non-negotiable, and bending could compromise India’s long-term interests,” GTRI emphasized.
Outlook: September Critical as Full Tariff Impact Kicks In
With September being the first month where Indian exports will face the full brunt of 50% tariffs for its entire duration, experts fear the downturn could deepen.
“This is a wake-up call. India must immediately identify and address structural issues affecting even tariff-exempt sectors,” said Srivastava.
As geopolitical trade tensions rise and global consumer patterns shift, India’s export resilience will be tested — not just by external shocks, but by its own preparedness to adapt and respond.
