Amid lingering tariff-led pressures from the US, Indian exporters are being pushed to scout for new markets and deepen exposure to non-US geographies. That shift is already underway.
During April-August 2025, Indian exporters front-loaded shipments to the US at a faster pace to take advantage of a temporary cost edge, ahead of new tariff rates announced by Washington on 2 April—marked as “Liberation Day.” In the subsequent September-November period, after the US imposed a 50% tariff on Indian exports, exporters began re-routing shipments and diversifying towards other global markets.
“Exports to the US showed slight moderation. However, exports to the Rest of the World have picked up to $89.9 billion during September-November 2025 compared to $86.2 billion during the same period of previous year. Thus, the beginning of the substitution effect has already started taking shape,” said BoB Capital Market report dated 2 January.
Export diversification, however, is typically a slow and long-drawn process that requires sustained policy support from governments. Data for April-November (8MFY26) reflect this uneven transition. Exports to the US rose about 11% year-on-year to $59 billion, while exports to the rest of the world were up around 1% to $233 billion, after having been 2% lower until August, according to Emkay Global Financial Services.
The recent improvement has been driven by sharp growth in exports to Spain, China, Vietnam, Hong Kong and Brazil, among others. This suggests that while Indian exporters may have identified new destinations, some trans-shipments are also taking place, Emkay added. Trans-shipment refers to the movement of goods from one transport vehicle to another at an intermediate location to reach the final destination, often because direct routes are unavailable.
Meanwhile, there is little clarity on whether—or when—a formal trade deal between India and the US could materialize. On the contrary, US Republican Senator Lindsey Graham said in a recent social media post that President Donald Trump has approved a Russia sanctions bill proposing 500% tariffs on countries purchasing Russian oil, including India, China, and Brazil.
“As India’s services trade is much more concentrated in the US, the worrying aspect is that a 500% tariff could be applicable on both goods and services,” cautioned Gaura Sen Gupta, economist at IDFC First Bank.
Another recent development adding to trade uncertainty is Mexico’s decision to impose tariffs ranging from 5% to 50% on imports from non-preferential trade partners, including India and China. While India’s exports to Mexico account for just 1.3% of total shipments, limiting the immediate impact, the move sets an uncomfortable precedent. “However, the move by Mexico represents a risk that other countries might follow the US playbook to shape trading relationships,” Sen Gupta said.
India signed trade deals with the UK and Oman in 2025, and the India–European Free Trade Association Trade and Economic Partnership Agreement has also come into force. But with protectionism rising across the global trade landscape, a key question remains: is the ongoing shift in India’s export geography structural or merely tactical?
The answer may not emerge quickly. India’s trade data has been volatile in recent months, complicating assessments. The more immediate concern is macroeconomic: increased downside risk to the current account deficit, which directly affects the rupee, could begin to bite.
