India’s export landscape underwent shifts in 2025 following the imposition of new tariffs by the United States. The US, India’s largest export destination, introduced a steep 50% tariff increase, including an unusual 25% tariff on India’s import of Russian crude oil. This move disrupted India’s export-oriented policies and prompted urgent government intervention to protect exporters and sustain trade growth.
of US Tariffs
Recently, the US announced reciprocal tariffs targeting Indian goods. These tariffs escalated in severity, affecting key sectors. India’s import of Russian crude oil faced a unique 25% tariff despite China and Europe being exempt. Since the US accounts for 20% of India’s merchandise exports, the tariffs posed a serious threat to export growth and economic stability.
Government Response and Export Promotion Mission
India’s 2025-26 Union Budget had already prioritised export promotion by launching an Export Promotion Mission. Post-tariff imposition, the government accelerated plans to support exporters. The strategy includes both fiscal and non-fiscal measures. Fiscal support involves direct financial aid while non-fiscal measures focus on credit facilitation and risk mitigation for exporters.
Mitigation and Long-Term Trade Strategy
The government’s approach balances immediate relief with future growth. Short-term measures aim to cushion exporters from the tariff shock and prevent business crises. Long-term plans focus on enhancing trade competitiveness, addressing policy gaps, and expanding market access beyond the US. This dual approach seeks to stabilise exports and build resilience against external shocks.
Complex Impact on Exporters and Supply Chains
The tariff impact extends beyond direct exporters. Multiple layers of producers and supply chains face potential disruption. Effective support packages must consider these linkages to prevent cascading economic effects. This comprehensive view ensures that assistance reaches all affected stakeholders in the export ecosystem.
Trade Negotiations and Future Prospects
Ultimately, fiscal and monetary interventions may offer only temporary relief. The most sustainable solution lies in diplomatic and trade negotiations. India and the US have resumed talks for a broader trade agreement, with early signs of improved relations. Expediting mutually beneficial deals with other global partners is also critical for diversifying export markets and reducing dependency risks.
Questions for UPSC:
- Point out the effects of tariff impositions on international trade and how countries can mitigate such impacts through policy measures.
- Critically analyse the role of export promotion missions in strengthening a country’s trade performance with suitable examples.
- Underline the importance of supply chain linkages in international trade and estimate their impact on economic stability during global trade disruptions.
- What are the challenges and opportunities in negotiating bilateral trade agreements? How do such agreements influence a country’s foreign trade strategy?
