US Share of Indian Exports Remains Unchanged Despite a Year of Trump’s Tariffs

New Delhi, Aug 19 (KNN) The United States continued to account for around 20 per cent of India’s exports in the 12 months through July, despite higher US tariffs on Indian goods and India’s efforts to diversify its export markets, according to an analysis of official trade data.

The US share has remained broadly stable even as the administration of President Donald Trump imposed tariffs of up to 50 per cent on Indian goods at one stage. The rate was subsequently reduced to 18 per cent in February and is currently at 10 per cent.

The US accounted for nearly 20 per cent of India’s exports during the period, up from 17.4 per cent in 2022-23, highlighting the continued importance of the American market despite growing trade uncertainties.

India Accelerates Market Diversification

Uncertainty over trade relations with the US has prompted India to accelerate negotiations with other major economies. Over the past year, India has concluded trade agreements with the UK, the European Union, Oman and New Zealand, while also pursuing negotiations with other markets.

Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai said meaningful results from market diversification could take two to three years. He noted that the US remains the most attractive market for Indian exporters, Bloomberg News reported.

“The industry has become extremely cautious of the fact that they have to diversify as a strategy to de-risk...  And from that perspective, I think it's a very good lesson the US tariff war taught us,” Sahai added.

US Remains Key Export Market

The scale and demand of the US market make it particularly important for Indian exporters of electronics, engineering goods, pharmaceuticals, gems and jewellery and textiles. India and the US have yet to conclude a trade agreement despite prolonged negotiations.

India is also seeking to expand its export basket, with the government adding around 500 product lines, mainly across electronics, engineering and marine products.

Speaking to Bloomberg News last week, Commerce Secretary Rajesh Agrawal said, “The focus is on engaging with economies that collectively account for over two-thirds of global GDP.”

Referring to the role of free trade agreements (FTAs) in providing stable frameworks for economic partnerships and reducing dependence on individual markets, Agrawal noted, “In an environment of global uncertainty and shifting trade patterns, FTAs also serve as institutional anchors for trusted economic partnerships.” 

India has also signed terms of reference with the Southern African Customs Union to speed up trade negotiations and is seeking to expand its trade network across Latin America, West Asia and Africa.

New Markets Gain Momentum

Some trade agreements already in force are showing early signs of supporting export growth. Australia has emerged as one of India's faster-growing markets, while the UAE was the country's second-largest export destination in the 12 months through July. Both countries signed trade agreements with India in 2022.

Exports to several smaller markets, including Tanzania, Vietnam, South Korea, Sri Lanka and Kenya, have also grown, although their trade volumes remain significantly below those of the US.

Exports to China increased by 42 per cent in the 12 months through July, with shipments reaching USD 21.5 billion, compared with USD 88.5 billion exported to the US during the period.

Pritam Banerjee, a trade analyst and former head of think tank Centre for WTO Studies emphasised that FTAs could help India attract manufacturing activity away from China, but cautioned that the opportunity could be limited in time.

He said deeper economic integration with G20 economies, which account for about 85 per cent of global GDP, along with stronger trade links with Latin America, West Asia and Africa, could support India’s efforts to diversify its export base.

(KNN Bureau)