ANALYSIS High US tariffs prompt exports pivot to UAE, China, Europe

India exported goods worth $86.51 billion to the US in FY25

Tariffs near 50 percent dragged down India’s goods exports to the US in September, particularly for labour-intensive products, but Indian exporters swiftly redirected some shipments to markets such as the United Arab Emirates (UAE), Spain, China, and Italy, according to a detailed breakdown of trade data.

Shipments to the US fell 21 percent from August and nearly 12 percent from a year earlier to $5.4 billion. Exports of cotton garments and related accessories, among India’s top shipments to the US, dropped 25 percent from a year earlier and 34 percent from the preceding month.

At the same time, shipments of this category to Italy increased 15 percent sequentially and doubled from the same month last year, data from the commerce ministry showed.

Marine products, another top export item to the US, fell nearly 27 percent year-on-year in September, while posting a modest growth of less than 2 percent compared to August. In contrast, shipments to China surged nearly 60 percent from a year earlier and 65 percent sequentially. A similar trend was observed in marine products sales to Thailand, Vietnam, and Belgium.

Gems and jewellery, as well as leather goods, among India’s top exports to the US, showed signs of diversification even as overall shipments to America declined. Exports of gold and other precious metal jewellery to the US fell 71 percent year-on-year and 54 percent from August, while shipments to the UAE jumped nearly 27 percent sequentially.

These signs of diversification have been key to India’s merchandise export growing by 3.6 percent to $36.38 billion in September from the preceding month. Outbound shipments of goods rose 6.7 percent during September from a year earlier.

Garima Kapoor, Chief Economist of Elara Capital, said that diversification of exports has helped limit the impact of Trump’s tariffs.

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

Indian exports to the UAE (24 percent), Spain (151 percent), China (34 percent), Bangladesh (23 percent) and Egypt (67 percent) saw a significant increase in September versus the same month last year.

FIEO President, SC Ralhan also pointed out last month that while the US continues to be India’s largest export destination, followed by the UAE, Netherlands, China, the UK, and Germany, there is substantial untapped potential in regions such as Latin America, Africa, and ASEAN.

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

To be sure, exporters have cautioned that, given the US remains India’s largest trading partner, diversification is unlikely to fully offset the impact of the steep 50 percent tariffs on most Indian goods.

According to the government’s estimate, Indian exports worth roughly $48.2 billion are facing 50 percent tariffs from August 27.

India exported goods worth $86.51 billion to the US in FY25, out of which the top five account for almost $60 billion of all outbound shipments to American shores.