India's exports to the United States, its largest trading partner, have plummeted by 28.5% over the past five months amid escalating U.S. tariffs that have rendered Indian goods among the most heavily taxed in the American market, according to a new analysis by the Global Trade Research Initiative (GTRI). Shipments dropped from $8.83 billion in May 2025 to $6.31 billion in October 2025, marking one of the sharpest short-term contractions in recent years and erasing nearly $2.5 billion in trade value. The decline coincides with a rapid tariff escalation—starting at 10% on April 2, rising to 25% on August 7, and hitting 50% by late August—far exceeding duties on competitors like China (around 30%) and Japan (15%). GTRI founder Ajay Srivastava warned that without swift policy interventions, the damage could extend to India's FY26 export target of $1 trillion, particularly in labor-intensive sectors employing millions.

The tariff shock has reverberated across all categories of exports, with no segment spared despite some enjoying exemptions. Tariff-free items like smartphones, pharmaceuticals, and petroleum products—accounting for 40.3% of October's shipments—still contracted 25.8%, falling from $3.42 billion in May to $2.54 billion, a loss of $881 million. Smartphones, India's top U.S. export line, suffered the steepest blow at 36%, sliding from $2.29 billion to $1.50 billion (a $790 million shortfall), while pharmaceuticals dipped 1.6% to $733.6 million. Products facing uniform global tariffs, such as iron, steel, aluminum, copper, and auto parts (7.6% of exports), declined 23.8% to $480 million, reflecting broader U.S. industrial slowdowns rather than India-specific barriers.

Labor-intensive sectors, comprising 52.1% of October exports and hit hardest by the 50% duties, collapsed 31.2% from $4.78 billion to $3.29 billion—a staggering $1.5 billion erosion that threatens jobs in textiles, gems and jewelry, apparel, and seafood processing. Monthly trends underscore the acceleration: exports halved from $2 billion in June to $964.8 million in August before a modest October rebound to $1.5 billion, but overall momentum remains negative. GTRI attributes the uniform downturn—even in exempt categories—to reduced U.S. demand, price sensitivity, and shifting consumer preferences, urging deeper probes into supply chain disruptions like component shortages in electronics assembly.

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In response, GTRI has called for urgent government action, including the immediate operationalization of the Rs 25,060 crore Export Promotion Mission (EPM) approved on November 12, which targets MSMEs, first-time exporters, and labor-heavy industries but remains stalled eight months into FY26. The think tank also advocates diplomatic efforts to lift the additional 25% U.S. tariff tied to India's Russian oil imports, which could halve the effective burden to 25% and provide breathing room. Long-dormant schemes like the Market Access Initiative and Interest Equalisation Scheme have disbursed zero funds this year, exacerbating vulnerabilities as competitors like Vietnam and Thailand capture lost market share in gems (down 60%) and textiles.

The broader implications for India's economy are stark, with the U.S. absorbing 18% of total exports ($52 billion in the first seven months of FY26) and any prolonged slump risking a wider trade deficit amid surging gold imports. As bilateral trade talks loom under the incoming U.S. administration, GTRI stresses that delayed relief could undermine New Delhi's diversification goals, pushing exporters toward riskier markets and eroding competitiveness in a post-tariff world.

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