Indian exports shift strategy toward diversification to offset US tariff impact: Report

New Delhi [India], January 2 : Indian exporters have begun a strategic shift toward market diversification as a primary mechanism to counter the impact of significantly higher US tariffs and the absence of a formal trade deal. According to a report from the Bank of Baroda, this transition follows a period of rapid frontloading of shipments earlier in 2025 as businesses sought to secure cost advantages before new trade barriers took effect.

The report identifies a structural change in India's export profile, specifically highlighting two distinct phases influenced by US policy shifts. Following the US tariffs announcement on April 2, 2025, exports to the US surged by USD 6 billion during the April-August period compared to the previous year. This spike occurred while older tariff rates of 0.5 per cent to 10 per cent remained in place.

However, the environment changed on August 7 when a 25 per cent tariff rate was implemented, followed by an increase to 50 per cent on August 27. The latter included a 25 per cent penalty linked to India's status as a major buyer of Russian oil.

The report noted in the report that while the US remains a critical market, the subsequent September-November period showed a "degree of diversification with exports to the rest of the world excluding the US picking up and some trimming down of exports to the US."

The report data indicate that during this second phase, exports to the rest of the world grew to USD 89.9 billion from USD 86.2 billion in the prior year, while the US-bound shipments saw a slight moderation. This shift suggests that "the beginning of the substitution effect has already started taking shape."

Sector-specific data reveal that marine products, electronic goods, and gems and jewellery are leading this diversification. For marine products, the US market share fell by 13.6 per cent in the September-October period, while the share of exports to China and Thailand rose to 20.6 per cent and 7.3 per cent, respectively.

Similarly, electronic goods saw a sharp increase in shipments to the UAE, with its share rising to 15.3 per cent from 8.8 per cent. The report also highlights that Hong Kong has become a significant destination for gems and jewellery, with its export share reaching 11 per cent.

The report emphasises that certain sectors, including readymade garments, textiles, and machinery, require further country-wise diversification to "negate the impact of any loss in output from higher tariff rates."

Average monthly exports to the US dropped to USD 5.9 billion in September-October 2025, down from USD 8.1 billion during the April-August period.

The report concludes that while individual market shares may currently be small, a focus on "integration with global supply chains, competitive pricing and improved logistics" may help insulate the Indian economy from output losses until a formal trade agreement is established.

Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor