U.S. tariff impact: India is finding newer markets, strengthening old trade routes to compensate

The United States started using tariffs to put pressure on countries that were still buying Russian oil. This had an impact on India because India relies on other countries for the things it needs to make goods and for people to buy those goods. India felt the effects away. It became a lot more expensive for India to sell things it made to the United States. This also made things tough between the United States and India which’s normally a very important relationship, for both the United States and India. New Delhi and Indian exporters did something about this situation. They took action on two things.

First they tried to find new people to buy their goods in different places like Asia and the Middle East and Africa and Latin America and some parts of Europe.

Second they worked on making ways to move their goods from one place to another. They looked at using ships. They also thought about using roads and ports that connect to the sea.

For example they thought about using the International North–South Transport Corridor and the port at Chabahar.

Indian exporters wanted to make sure they had options, for moving their goods. Together with domestic measures to support affected industries, these steps have blunted the tariff shock but not erased the costs. The story is one of adaptation: partial mitigation of tariff damage through market reorientation, infrastructural pivoting, and diplomatic balancing — but serious challenges remain for labor-intensive sectors and smaller exporters.

1. So what is the big deal about the U.S. Tariffs. Why do the U.S. Tariffs matter to us? The U.S. Tariffs are like a tax that the United States puts on things that come from countries. This means that when something is imported to the United States, the person or company that brings it in has to pay the U.S. Tariffs. The U.S. Tariffs can make things more expensive for people in the United States. The main reason the U.S. Tariffs matter is that they can affect how money people have to spend on things they need. The U.S. Tariffs are also important because they can help the United States make jobs and help the countrys economy grow.. At the same time the U.S. Tariffs can also hurt other countries and make them unhappy, with the United States. The U.S. Tariffs are a deal and that is why the U.S. Tariffs matter.

In the middle of 2025 the United States government decided to put taxes on things, from countries that still bought a lot of oil from Russia. The main goal of this petroleum policy was to stop countries from giving Russia money to fight its war by making it more expensive for them to import Russian oil. For India — a major buyer of discounted Russian crude — Washington’s step translated into sudden tariff hikes (rising to 50% in some announcements and with political discussion of even heavier levies), hitting the price competitiveness of Indian exports to the U.S. and raising immediate alarm in export-heavy states and industries.

The tariffs are a deal because the United States is the main place that India sells its products to. India sends tens of billions of dollars worth of stuff to the United States every year. If the tariffs on those products go up by 25 to 50 percent it will make a difference for things like clothes and shoes and jewelry because people are very sensitive about the prices of these things. It will also be a problem for companies that use parts from India to make products that they sell in the United States because it will be harder for them to plan how to get all the parts they need. The tariffs will affect Indian products, including textiles, footwear, gems and jewelry and some consumer goods as well, as generic medicines. The tariffs thus pose both short-term demand shocks and longer-term strategic headaches for exporters and policymakers.

2. Immediate impacts by sector

Textiles and apparel: Highly price elastic and dominated by small and medium enterprises (SMEs), this sector was among the most vulnerable. Higher U.S. tariffs made India-made garments less competitive relative to Bangladesh, Vietnam or Turkey, prompting urgent discussions among exporters about route-to-market changes and cost absorption.

Gems & jewellery, leather and other labor-intensive goods: These categories saw order cancellations and renegotiations, especially for lower-end products where a tariff shock cannot be passed on to the final buyer. State exporters’ bodies publicly warned of large job risks.

Pharmaceuticals and generic drugs: While more differentiated and quality-driven, some bulk generics with narrow margins faced pressures. For firms with established U.S. regulatory approvals and deeper buyer relationships the impact was smaller; for price-sensitive producers the margins tightened.

IT and services: A large part of India’s U.S. trade is services, which are not directly liable for goods tariffs; nonetheless, a broader geopolitical chill and policy tension carried reputational and negotiation costs for some contracts.

Overall, the tariff shock was asymmetric: high-volume, low-margin exporters were hit hardest; larger manufacturers and specialized service providers had more buffers.

3. Market diversification is when companies look for new people to buy their products. This is, about buyers and how exporters changed what they were doing. Exporters had to adjust to find people who would buy the things they were selling. They did this to keep their businesses going. The exporters found markets and that helped them to keep selling their products to new buyers.

A predictable and necessary response was to look for demand beyond the United States. Indian exporters and government trade agencies went ahead. Accelerated their efforts, in many different directions:

Asia (ASEAN, East Asia, Central Asia): Neighboring and regional markets absorbed increased shipments, especially for agricultural, textile and manufactured goods. Some products that were previously U.S.-centric found buyers in Southeast Asia and China; marine products, for instance, saw partial diversion.

Middle East and Africa: These regions grew in importance as importers of Indian staples (rice, sugar, pharmaceuticals) and manufactured goods. Strong historical links, diaspora networks, and the region’s growing consumer bases made them logical alternatives. India also stepped up trade diplomacy with Gulf states and African capitals to smooth market access.

Latin America: Targeted campaigns and trade delegations began to open Latin American retailers and wholesalers to Indian exports — especially in sectors like pharmaceuticals and automotive components. Trade with some countries accelerated where tariff regimes or trade agreements were more favorable.

Russia and Eurasia: Strategic ties with Russia intensified, partly driven by energy ties. Some Indian manufacturers increased shipments to Russian markets as bilateral trade ties deepened; logistics via INSTC and other corridors became more relevant. But Russia’s market structure and payment mechanisms are different and not a plug-and-play substitute for U.S. demand.

EU and UK: Negotiations and trade talks with the EU and a completed (or accelerated) UK trade agreement opened incremental room for Indian exporters, though these markets come with their own regulatory and standards barriers that require compliance costs.

The pace and success of diversification varied by product. High-volume, low-margin goods were easier to redirect where tariffs were not as punitive or where buyers had similar price sensitivity. Complex-and-regulated products (pharma, certain chemicals) required formal approvals and thus had slower shifts.

4. Strengthening old trade routes and building new ones

To make things work for kinds of buyers the logistics and infrastructure had to be changed. India made progress in areas. India changed the logistics and infrastructure to help the buyers.

Maritime pivots and port investments: India increased focus on regional port capacity and hinterland connectivity to serve African and West Asian markets more effectively. Ports handling transshipment and re-export business saw greater traffic and investment.

The International North-South Transport Corridor and Chabahar are getting a lot of attention these days. People are looking at ways to connect India to markets by land. The International North-South Transport Corridor, which goes through India, Iran, Russia and other places is one way to do this. The Chabahar port project is another way. These routes can help us have options and not rely so much on long sea routes. Many experts and researchers have written about how these corridorsre being used more and more over the past year. The International North-South Transport Corridor and Chabahar are very important, for this. Such corridors are politically significant as well as commercially useful for certain cargo types (high-value, time-sensitive goods).

Rail + sea combinations: For markets in Central Asia and parts of Europe, Indian exporters explored combinations of rail and maritime routes that shorten transit times and sometimes avoid chokepoints. These are not yet a replacement for containerized sea freight to the U.S., but they help with Russia/Eurasia linkages and some intra-Asian trade.

Logistics and finance solutions: Exporters sought trade-finance instruments that reduce working-capital stress when moving into new markets. Government export incentives, credit lines, and buyer-credit schemes were deployed more actively to encourage market exploration.

Taken together, these moves reduced transit friction and signaled to foreign buyers and partners that India intended to remain a reliable supplier even as the U.S. market contracted. But infrastructure realignment takes time and capital — so the gains are incremental rather than instantaneous.

5. Government policy and institutional responses

The city of New Delhi came up with a lot of ways to help people who export things and to support the people who are working. They did this by using policy levers to support the exporters and help the labor markets in New Delhi. New Delhi is trying to make things better for exporters in New Delhi and for the labor markets, in New Delhi.

Export stimulus and targeted relief: Additional credits, duty drawback recalibrations, and temporary subsidies for the hardest-hit sectors were announced or expanded. Export promotion councils received mandates to find alternate buyers and support market development.

Trade diplomacy & FTAs: India accelerated bilateral talks and sought new free trade agreements (or limited preferential pacts) with countries and blocs that could absorb redirected shipments. Negotiations with partners like the UK, New Zealand, Oman, and talks with the EU and Australia received new impetus.

Energy reporting and political signaling: To reduce U.S. pressure, India tightened reporting on oil purchases and encouraged refiners to document steps taken to diversify suppliers — actions aimed at both domestic transparency and diplomatic reassurance to Washington.

Worker support & reskilling hints: For states and sectors at risk, conversations about income support, short-term employment schemes, and upskilling were elevated — though actual implementation varies by state capacity and fiscal space.

The policy toolkit has been broad, but implementation complexity and fiscal constraints limited how comprehensively government action could offset the tariff shock.

6. Economic outcomes to date: evidence from trade flows

The facts are clear: the information we have is giving us a picture. The hard data shows some things that’re good and some things that are not so good. The hard data is telling us things.

In some months after the tariff imposition, Indian exports to the U.S. fell for specific product categories; in others, overall exports rebounded as sellers found new buyers or absorbed costs. For example, later 2025 data recorded moments of export recovery even as tariffs remained in place — reflecting both adaptation and seasonal effects.

At a macro level, India’s GDP growth projections remained robust through fiscal 2025–26, due to strong domestic demand and ongoing investment — which helped absorb some of the external shock. That resilience does not negate the distributional pain across exporters and workers in affected sectors.

In short: trade diversion and market diversification softened but did not fully erase the tariff hit. Some sectors regained momentum; others continue to lag.

7. Geopolitical balancing and strategic implications

Tariffs imposed in the name of geopolitics forced India into a balancing act. This is a tough spot for India. The country has to balance a lot of things because of these tariffs that are imposed in the name of geopolitics. India is doing its best to deal with the situation. Tariffs imposed in the name of geopolitics are making things very difficult, for India.

Strategic autonomy vs. great-power pressure: New Delhi defended its energy policy as part of its national interest while ramping diplomatic engagement with Washington to avoid permanent damage to the bilateral relationship. At the same time, India deepened energy and trade cooperation with Russia and other partners — a pragmatic, hedging approach.

Multipolar trade architecture: The episode accelerated a longer-running trend: both India and many other countries are actively trying to reduce dependence on any single market (whether the U.S., China or EU) for economic resilience. India’s redoubled outreach to the Global South and the Middle East fits into that multipolar playbook.

Domestic political economy: The tariff shock became a headline political issue at home, particularly in exporting states and constituencies dependent on labor-intensive manufacturing. That domestic pressure has pushed central and state governments to act more rapidly in support of exporters.

8. Constraints and blind spots in India’s response

There are some limits that affect how fast and how much India can change the way it does trade:

Market fit and standards: The thing is, you cannot just replace every buyer from the United States with someone from Africa or Latin America. The quality of things has to be up to standards. There are rules that products have to follow especially when it comes to medicine and food.

These products need to be approved by the people. The labels and packaging also have to be just right. And then there is the matter of getting these products to the people who want to buy them. That is a system in itself.

All of this takes a lot of time. It costs a lot of money. Market fit and standards are very important, for the Latin American purchaser and the U.S. Buyer.

Logistics and transit times: New routes (e.g., via INSTC) may reduce geopolitically sensitive dependence but can be slower, costlier for bulk goods, or capacity-limited for containerized trade. Scaling them requires sustained investment.

Price competitiveness: For inherently low-margin goods, the added cost of finding and establishing new markets may not be recoverable, forcing business contraction in some cases.

Political risk abroad: New markets come with their own political and currency risks; overreliance on any single alternative creates fresh vulnerabilities.

9. What things were successful. What things were not successful

Worked:

Rapid trade diplomacy and focused export promotion helped several exporters secure alternative buyers quickly.

Infrastructure investments and port policy nudges made transshipment to new regions smoother in the short run.

Fiscal and credit measures reduced immediate liquidity stress for many exporters.

It did not. It only worked a little bit:

A full replacement of lost U.S. demand was not possible for many sectors within a single quarters’ time.

Smaller firms without market-development budgets or regulatory expertise struggled to pivot.

10. Policy recommendations and the road ahead

For India to make its response durable and equitable policymakers should think about a plan that has parts. This means India needs a strategy that is made up of layers. India should have a strategy to make sure its response is durable and equitable. Policymakers, in India must consider this kind of strategy for India. A layered strategy is what India needs to make its response durable and equitable.

Accelerate market diversification programs with export-market teams embedded in embassies, focused on matching specific product lines with retailers and distributors in target regions (Africa, Latin America, ASEAN). Provide small grants for market entry compliance (packaging, standards testing).

Invest in corridor capacity (INSTC, Chabahar, rail-sea hubs) with public-private financing to scale volumes that make alternate routes commercially competitive. Prioritize container handling and customs modernization.

Targeted social protection and reskilling for affected workers in textiles, leather and gems so supply-side shocks do not become long-term unemployment crises.

Trade agreements and regulatory convergence to reduce non-tariff barriers with high-potential markets — faster recognition of standards, mutual testing frameworks for pharma and food, and digital trade facilitation.

Enhance trade finance instruments for SMEs — export insurance, buyer-credit lines, and simpler procedures to get paid in new jurisdictions.

Diplomatic engagement with the U.S. to explain policy choices and seek negotiated reliefs or exemptions where national security considerations allow — while preserving India’s strategic autonomy. Continued quiet diplomacy can reduce the risk of even larger punitive measures.

11.

The United States tariffs really changed how India does trade. India had to change its trade strategy quickly. The Indian government and private companies worked together to find markets and make new trade routes. They also helped companies that were struggling because of the tariffs. These actions were good enough to stop Indias exports from getting really bad. Now India is making long term changes to trade with different countries, not just one or two. This will help India have a balanced trade with the world. Indias trade strategy is becoming more diverse. India is working with many countries, which is a good thing, for Indias economy. The thing is, this response is not free and it is not the story. Some areas and workers are going to have a time and a lot of the changes to the system and the market are going to take a long time to really happen. The changes to things like roads and buildings and the way the market works will take years to be, in place. This means that people who work in sectors will have to deal with real problems.

In short, tariffs created a significant shock, but India’s combination of trade diplomacy, market outreach, and logistics reprioritization has reduced the damage — while exposing limits that policymakers must address to turn short-term fixes into long-term resilience. Continued monitoring of trade flows, faster implementation of corridor investments, and careful diplomatic management with the U.S. will determine whether this episode becomes a transient upset or a longer, structural reordering of India’s trade relationships.