Indian Exporters Pivot To Market Diversification Amid Higher US Tariffs: Bank Of Baroda

(MENAFN- KNN India) New Delhi, Jan 3 (KNN) Indian exporters are increasingly diversifying export markets to mitigate the impact of sharply higher US tariffs and the absence of a formal bilateral trade agreement, according to a report by Bank of Baroda.

The shift follows a phase of accelerated shipments earlier in 2025, when exporters frontloaded exports to take advantage of lower tariff rates before new trade barriers were imposed.

Two-Phase Shift in Export Patterns

The report identifies a structural change in India's export profile, unfolding in two distinct phases following changes in US trade policy, reported ANI.

After the US announced higher tariffs on April 2, 2025, Indian exports to the US rose sharply, increasing by about USD 6 billion during the April–August period compared with the previous year. This surge occurred while legacy tariff rates ranging from 0.5 per cent to 10 per cent were still applicable.

The trade environment tightened from August 7, when the US imposed a 25 per cent tariff, followed by a further hike to 50 per cent on August 27. The latter included an additional 25 per cent penalty linked to India's status as a major buyer of Russian oil.

Emerging Diversification Beyond the US

While the US continues to be a key export destination, the report noted that the September–November period reflected 'a degree of diversification', with exports to markets excluding the US gaining traction and shipments to the US moderating.

Exports to the rest of the world rose to USD 89.9 billion during this phase, up from USD 86.2 billion a year earlier, while US-bound exports showed a slight decline. This trend suggests that a substitution effect has begun to take shape.

Sectoral Trends

Sector-wise data indicate that marine products, electronic goods, and gems and jewellery are at the forefront of diversification.

In marine products, the US market share declined by 13.6 per cent during September–October, while exports to China and Thailand increased, with their shares rising to 20.6 per cent and 7.3 per cent, respectively.

Electronic goods exports saw a notable rise in shipments to the UAE, whose share increased to 15.3 per cent from 8.8 per cent earlier. Hong Kong also emerged as a key destination for gems and jewellery, accounting for about 11 per cent of exports in the segment.

Areas Requiring Further Diversification

The report cautioned that some sectors, including readymade garments, textiles, and machinery, still require broader country-wise diversification to offset potential output losses arising from higher tariff rates.

Average monthly exports to the US fell to USD 5.9 billion during September–October 2025, compared with USD 8.1 billion in the April–August period.

Outlook

According to the report, while individual market shares in alternative destinations may currently be modest, deeper integration with global supply chains, competitive pricing, and improved logistics could help cushion the Indian economy from export-related disruptions until a formal trade agreement with the US is in place.

(KNN Bureau)

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