Defying tariff odds

The biggest challenge in the US market is coping with the tariff disruption of the Trump administration. In contrast, export growth to China appears impressive at 36.1% but it is from a much smaller base. Stepping up shipments is far from easy as it is a difficult market to penetrate. The dragon’s “persistent non-tariff barriers”, for instance, have been restricting our exports, according to India’s Finance Minister, Nirmala Sitharaman.

Even if some of these only remained threats, the uncertainty impacted exporters of seafood, gems and jewellery, textiles, drugs, and engineering goods. According to a five-part series in FE, the US remains the most important destination but exporters sustained volumes by diversifying. Seafood exports took a big hit last fiscal but this was offset by shipments to the European Union (EU) and China. Gems and jewellery is feebly recovering with shipments redirected to West Asia.

As tariffs swung between 10%, 25%, and 50% complicating sourcing decisions for US buyers, diversification was imperative also for textile exporters. The threat of extending a 100% levy on branded medicines impacted prospective exports of high-value nutraceutical products. Only engineering goods bucked the trend as both buyers and suppliers absorbed US tariff costs. Unfortunately, the prospect of exporting more to China is equally challenging.

While recent gains include seafood products, naphtha, and printed circuit boards, cracking that market has proved elusive. Seafood exporters, however, confront the reality that the dragon absorbs large volumes but squeezes prices. Market access is being denied for shipments of generic drugs, bovine meat, and agricultural produce despite significant demand potential. While there have been discussions for a reverse-trade model for drugs—India imports bulk drugs from the dragon, converts them to finished dosage forms, and exports these back to China—there has so far been no discernible progress.

As for non-tariff barriers, China has banned 10 Indian rice exporters by revoking their registrations and rejected over 70 non-basmati shipments as they allegedly contained genetically modified (GM) organisms although India does not grow GM food crops. Trade diversification through free trade agreements (FTAs) is certainly efficacious in this regard. India’s exports to the UK and Oman, where our trade agreements have become operational, have done well.

Our FTA with New Zealand has also come into force recently. The trade deal with the EU is also expected to become operational in early 2027. All of this can boost our merchandise shipments manifold. India must prioritise concluding an agreement with its biggest export destination, the US, so that exporters benefit from a stable tariff architecture. In this regard, there are welcome indications from the US that this deal is imminent. There is also no alternative but to keep engaging with China so that our trading relationship is less one-sided and has more balance.