US tariffs hit key Indian sectors hard—and official data shows how deep the damage runs
US tariffs have been a major drag on India’s exports, hitting labour-intensive sectors like garments and jewellery. But the marine industry stood out, rapidly tapping new markets to cushion the blow.
US President Donald Trump’s punitive tariffs have hit Indian exporters hard, and the damage deepened after an additional 25% penalty came into effect on 27 August. The impact was clear in September, when exports to the US plunged 12% year-on-year.
Detailed commerce ministry data released last week revealed which sectors bore the brunt and which managed to offset the losses in India’s largest export destination. The US share in India’s total exports dropped sharply from a recent high of nearly 24% to just 15% in September. Despite this decline, the US remained India’s largest market, but it shifted from a growth driver to a drag on overall export performance.
Tariff toll
India’s exports still grew 6.7% year-on-year in September, thanks largely to efforts to find alternative markets. Shipments rose 24.3% to the United Arab Emirates (UAE), 34% to China, 17.7% to Hong Kong, 11.9% to the UK, 21.9% to Bangladesh, and 150.8% to Spain, among others. These gains helped offset the steep decline in the US.
Even so, given the US’s weight in India’s export basket, the drag was substantial—it alone pulled overall growth down by 4.2 percentage points, a sharp reversal from its earlier role as a key support.
Until August, the US had been a net positive, boosting India’s exports, most notably in January when Trump assumed office and in March amid front-loading ahead of the 2 April reciprocal tariffs.
Barring a few categories such as petroleum products, ores and minerals, and electronic goods (which enjoyed tariff exemptions), nearly every other sector saw exports to the US fall in September.
Job jeopardy
Labour-intensive and small-scale sectors faced the steepest tariffs, often exceeding 50%. The fallout is now visible: gems and jewellery exports to the US plunged 74% in September, the sharpest drop among all categories.
A Mint analysis of major commodities and commodity groups shows at least eight recorded a 20% or more year-on-year fall. These include gems and jewellery, glassware, textiles, ready-made garments, carpets, marine products, rubber manufactured goods, and paper and wood products. Put together, these accounted for nearly a third of exports to the US.
Except for gems and jewellery and rubber goods, all these sectors had posted growth of over 7% in FY25. Many of these sectors now face mounting losses and possible job cuts if the trend continues. Finding alternative markets will be critical amid policy uncertainty in Washington and the lack of clarity on a trade deal.
Pharma puzzle
Trump’s tariff policy has been marked by flip-flops and uncertainty. Although he announced blanket hikes across all products, some sectors, most notably pharmaceuticals, were initially spared. That changed, at least partly, when he imposed a 100% tariff on branded drugs in late September.
Since India primarily exports generics, the 15.7% drop in drug, pharmaceutical, and fine-chemical exports is puzzling. Though, this is not the first time the sector has seen a decline but this certainly is the sharpest decline in four years.
One likely explanation is that Indian pharma companies pre-emptively cut their reliance on the US market. Exports to Brazil jumped 71.7%, Nigeria 93.5%, the UK 14%, the Netherlands 29.8%, and France 13.3%. As a result, the share of these markets rose—by 1.49 percentage points for Brazil, 1.69 for Nigeria, and 0.92 percentage points for the Netherlands in September compared to the FY25 average.
Dodging the bullet
The possibility of engaging in diverse markets may have held up overall pharmaceutical export growth during the month. Export of drugs, pharmaceuticals and fine chemicals grew 2.5%, albeit at the slowest pace since April, and was among the few sectors to stay afloat.
Auto components and parts also managed to grow 7.6%, despite a 12% fall to the US, as they saw a sharp rise in exports to the UAE (143.4%), Germany (40%), Thailand (21.8%), and Italy (28.5%).
Marine products—another US-heavy segment—offered a striking case of resilience. While exports to the US dropped 26.9%, overall marine exports rose 23.4%, showing the sector’s ability to pivot quickly to new buyers.
Apart from pharma, autos, and marine goods, however, most other sectors saw their exports either stagnate or shrink, underscoring heavy dependence on the US and weak demand elsewhere.
Marine magic
The marine sector’s rapid diversification offers a case study in adaptation. The US accounted for over 35% of India’s marine exports in FY25, a share that slid to 27.4% in August and 21.1% in September. Yet, India, the world’s second-largest fish producer and a major shrimp exporter, swiftly tapped other prominent markets—notably China and Thailand. This pivot towards Asia helped offset nearly all the losses arising from surrendering the US markets to high tariffs of nearly 60%.
In September 2024, India exported marine products worth $411 million to the US, China, and Thailand combined, of which $254 million went to the US. A year later, the US figure fell to $165 million, but total exports to the three countries dropped only $21 million. Together, China and Thailand overtook the US in share for the first time, signalling how a strategic pivot can mitigate trade shocks.
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