India’s exports to US slump under steep tariff hikes, $3.3 billion wiped out May–Sept 2025

Mumbai: India’s exports to the United States have experienced a significant downturn, marking one of the sharpest short-term declines in recent years. Between May and September 2025, exports to the US fell by 37.5 per cent, dropping from $8.8 billion to $5.5 billion. This decline comes in the wake of steep tariff hikes imposed by the US government, which began at 10 per cent on April 02, 2025, escalated to 25 per cent on August 07, 2025, and reached a punitive 50 per cent by late August 2025. The Global Trade Research Initiative (GTRI) has analysed the impact of these tariffs, revealing a widespread contraction across various sectors.

Surprisingly, tariff-free products, which account for nearly one-third of India’s total shipments to the US, suffered the most severe contraction. Exports in this category fell by 47 per cent, from $3.4 billion in May to $1.8 billion in September. Among the hardest-hit products were smartphones and pharmaceuticals, both of which are key beneficiaries of India’s Production Linked Incentive (PLI) manufacturing programme. 

Smartphone exports, which had seen a remarkable 197 per cent surge between April and September 2024 compared to the same period in 2025, plummeted by 58 per cent during the review period. Monthly shipments fell consistently, from $2.29 billion in May to $884.6 million in September. The reasons behind this sharp decline remain unclear and warrant further investigation. Pharmaceutical exports also experienced a notable drop, slipping by 15.7 per cent from $745.6 million to $628.3 million, despite being exempt from tariffs.

In contrast, sectors subject to uniform tariffs for all countries, such as industrial metals and auto parts, showed a milder decline. Exports in these categories fell by 16.7 per cent, from $0.6 billion to $0.5 billion. Within this group, aluminium exports dropped by 37 per cent, copper by 25 per cent, auto parts by 12 per cent, and iron and steel by 8 per cent. The relatively smaller contraction in these sectors suggests that the decline may be more closely linked to a slowdown in US industrial activity rather than a loss of competitiveness for Indian exporters.

The most severe impact was felt in labour-intensive sectors, which were subjected to the 50 per cent India-specific tariffs. These sectors, including textiles, gems and jewellery, chemicals, agri-foods, and machinery, collectively account for nearly 60 per cent of India’s exports to the US. Exports in these categories fell by 33 per cent, from $4.8 billion in May to $3.2 billion in September. 

Within this group, gems and jewellery exports were particularly hard-hit, collapsing by 59.5 per cent from $500.2 million to $202.8 million. Gold jewellery exports fell by 58 per cent, diamond-studded pieces by 63 per cent, and lab-grown jewellery by 37 per cent. Exports of cut and polished diamonds dropped by 54 per cent, while lab-grown diamond exports plunged by a staggering 89 per cent. The decline has severely impacted manufacturing hubs in Surat and Mumbai, as competitors from Thailand and Vietnam have captured lost US orders.

Solar panel exports also suffered a sharp decline, falling by 60.8 per cent from $202.6 million to $79.4 million. India’s competitiveness in the renewable energy sector has been eroded, particularly as China and Vietnam face lower tariffs of 30 per cent and 20 per cent, respectively. Textiles and garments, another key labour-intensive sector, saw exports fall by 37 per cent, from $944 million to $597 million. Within this category, garments experienced a 44 per cent decline, home textiles fell by 16 per cent, and yarn and fabrics dropped by 41 per cent. Knitted apparel exports decreased by 39 per cent, woven apparel by 50 per cent, and girls’ suits by 66 per cent.

Chemical exports also faced a significant downturn, shrinking by 35 per cent from $537 million to $350 million. Agrochemicals fell by 37 per cent, while essential oils dropped by 44 per cent. This decline has adversely affected production hubs in Vapi, Dahej, Ankleshwar, and Vizag, which are home to major firms such as UPL and Rallis India, as well as numerous micro, small, and medium enterprises (MSMEs) in Maharashtra and Karnataka.

Marine and seafood exports, another labour-intensive sector, declined by 49 per cent, from $223 million to $113 million. Vannamei shrimp exports fell by 51 per cent, while processed seafood dropped by 22 per cent. Coastal hubs such as Nellore, Bhimavaram, Kakinada, Paradeep, Veraval, and Porbandar have been severely impacted, as buyers have shifted their focus to competitors in Ecuador and Vietnam.

Agricultural and processed food exports also recorded a broad-based slump. Preparations of cereals fell by 27 per cent, processed fruits and vegetables by 44 per cent, roots and tubers by 45 per cent, cocoa products by 99 per cent, oilseeds by 53 per cent, dairy and honey by 59 per cent, processed foods by 35 per cent, coffee and spices by 40 per cent, and resins by 61 per cent. These losses have had a devastating impact on agricultural clusters in regions such as Nashik, Gujarat, Kerala, Karnataka, Jharkhand, and Chhattisgarh, erasing two years of steady growth.

The sharp decline in exports has prompted calls for urgent government intervention. Exporters are urging authorities to implement targeted relief measures to mitigate the impact of the tariffs. Proposed actions include enhanced interest-equalisation support to reduce financing costs, faster duty remission to alleviate liquidity pressures, and emergency credit lines for MSME exporters. Without swift and decisive action, India risks losing its market share to competitors such as Vietnam, Mexico, and China, even in sectors where it has traditionally held a strong position.

The data presented in the GTRI report underscores the significant impact of the US tariffs on India’s export performance. The tariffs have not only squeezed trade margins but have also exposed structural vulnerabilities across key industries. As the situation continues to unfold, it remains imperative for policymakers to address these challenges and support exporters in navigating the difficult terrain ahead.

India’s textile and apparel exports show resilience amid global challenges

Mumbai: India’s textile and apparel sector, including handicrafts, demonstrated notable resilience in the first half of FY 2025-26, managing to sustain growth despite global headwinds and tariff-related challenges in key markets. According to official data, exports of textiles, apparel and made-ups grew marginally by 0.1 per cent during April to September 2025 compared with the same period last year.

The performance was underpinned by diversification across markets. Exports were recorded in 111 countries, contributing $8,489.08 million in the six-month period, up from $7,718.55 million in the previous year. This reflects a 10 per cent increase in value and an absolute rise of $770.3 million. The figures highlight how Indian exporters have managed to offset pressures in traditional destinations by tapping into newer geographies.

Several major markets registered positive growth. The United Arab Emirates (UAE) saw exports rise by 14.5 per cent, Japan by 19 per cent, Spain by 9 per cent and France by 9.2 per cent. The United Kingdom (UK) and Germany also posted modest gains of 1.5 per cent and 2.9 per cent respectively. Beyond these, Egypt recorded a sharp 27 per cent increase, Saudi Arabia 12.5 per cent and Hong Kong an exceptional 69 per cent. This spread of growth across diverse regions underscores the sector’s adaptability in navigating shifting demand patterns and trade barriers.

The resilience comes at a time when global textile trade has been affected by slowing demand, rising costs and tariff-related frictions in some of India’s largest markets. The ability to maintain overall growth, even if modest, reflects the sector’s capacity to withstand external pressures. Ready-made garments, made-ups and handicrafts were among the key segments driving exports, showing that traditional strengths continue to support India’s position in global trade.

While the headline growth rate of 0.1 per cent may appear subdued, the broader picture reveals a sector that has managed to expand its footprint and secure higher value in several destinations. The increase in export earnings from a wider set of countries suggests that Indian textiles and apparel are finding new opportunities despite the challenges posed by tariffs and competition.

Sustaining this momentum will depend on continued diversification, investment in quality and design, and effective engagement with trade partners to address tariff concerns. The government’s data indicates that exporters are already moving in this direction, with the sector showing signs of resilience that could provide a foundation for stronger growth in the coming quarters.

India’s textile and apparel industry remains a critical contributor to employment and foreign exchange earnings. Its ability to adapt to global shifts while maintaining export levels highlights the importance of strategic diversification and market responsiveness. The first half of FY 2025-26 has shown that even in a difficult environment, the sector can hold its ground and build on its strengths.

US tariffs to hurt Indian leather industry, revenue may drop by 12%

Mumbai: The Indian leather and allied products industry is bracing for a 10–12% revenue decline this fiscal year, driven by the United States’ (US) imposition of a 50% tariff – comprising a 25% reciprocal tariff and a 25% penalty for purchasing Russian oil. The tariffs, which came into effect in August 2025, are expected to reduce export volumes by 13–14%, with export revenue projected to fall by 14–16% to $3.9–4 billion.  Finished leather products such as shoes and accessories, which fetch higher realisations of approximately $14 per unit, are particularly affected, further exacerbating the revenue loss.

“With loss of orders from the US, the export volume is expected to drop 13–14% this fiscal,” said Jayashree Nandakumar, Director at Crisil Ratings. “Revenue will be hit harder as the bulk of exports to the US is of finished leather products, which fetch higher realisations.”

The industry, which generated approximately ₹56,000 crore in revenue in fiscal 2025, relies heavily on exports, with the US accounting for 22% of the total and the European Union over 50%. The higher tariffs have placed Indian exporters at a disadvantage compared to competitors from countries like Cambodia, Italy, Vietnam, and France, where US tariffs are lower at 15–20%. Many Indian tanneries and small leather product manufacturers with significant exposure to the US market have already shut down operations.

The decline in export demand is expected to compress operating profitability by 150–200 basis points, with exporters struggling to absorb fixed costs such as salaries, leases, and maintenance. “Lower revenue and weak fixed cost absorption will compress the operating profitability of exporters by 250–300 basis points this fiscal,” said Athul Sreelatha, Associate Director at Crisil Ratings. “However, growth in domestic revenue will restrict the decline in the operating profitability of the overall industry to 150–200 basis points.”

Financial metrics are also set to weaken, with the net cash accrual to total debt ratio and interest coverage projected to drop to 0.1 times and 2.5 times, respectively, from 0.2 times and 3.7 times last fiscal. Leverage levels, however, are expected to remain stable due to reduced GST rates on intermediate leather goods and the absence of major debt-funded capital expenditure plans.

To mitigate the impact of the tariffs, exporters are exploring diversification into markets with favourable duty structures and relocating production to other regions. However, these measures are still in their early stages and will take time to yield results. The recently signed Free Trade Agreement with the United Kingdom (UK) and sustained demand from non-US markets may help limit the decline in export revenue.

In the domestic market, the reduction in goods and services tax (GST) rate on leather products from 18% to 12% is expected to enhance affordability and drive premiumisation. Combined with lower income taxes, stable inflation, and reduced interest rates, these factors are likely to boost domestic consumption. Meanwhile, the decline in export demand is expected to exert downward pressure on raw material prices, providing some relief to exporters, though not enough to offset the impact of the tariffs.

Crisil Ratings, which analysed 34 leather companies representing 12.5% of the industry’s revenue, highlighted four key factors to monitor: the evolving tariff environment, the ability to offset US revenue losses by targeting other markets, the impact of re-exported goods to Europe, and potential forex volatility.