Indian Exporters were blindsided by US exports

Blindsided by the Boom: How Indian Exporters' US Obsession Led to Tariff Turmoil

In the high-stakes world of global trade, few stories capture the perils of over-reliance like India's export saga with the United States. From 2016 to 2024, Indian exporters rode a wave of unprecedented growth in shipments to America, ballooning from roughly $44 billion annually to over $86 billion by FY 2024-25. This surge, fueled by booming demand for textiles, gems, pharmaceuticals, and electronics, blinded businesses to the risks of putting all their eggs in one basket. Little attention was paid to diversifying markets amid global uncertainties, leaving the sector vulnerable. When President Donald Trump's 50% tariffs slammed into effect on August 27, 2025—punishing India for its Russian oil purchases—the shockwaves were seismic. Exports to the US, accounting for nearly 20% of India's total, face a potential 43% plunge, threatening jobs, growth, and livelihoods. This article dissects the data, exposing how complacency turned prosperity into peril.

The US Gold Rush: A Decade of Dependence

India's export engine has hummed steadily over the past decade, with total merchandise and services exports climbing from $468 billion in FY 2014-15 to a record $820.9 billion in FY 2024-25—a 75% leap. Yet, beneath this aggregate glow lies a troubling truth: the US emerged as the undisputed kingpin, capturing an outsized share of the pie.Consider the numbers. In 2016, US-bound exports hovered around $44.7 billion, representing about 16-18% of India's total merchandise outflows. By contrast, in FY 2023-24, this figure had swelled to $78.3 billion, or 17.8% of the $440 billion total. Fast-forward to FY 2024-25, and the US absorbed $86.5 billion—19.95% of India's $433.6 billion merchandise exports. This isn't mere growth; it's dominance. The US overtook traditional heavyweights like the UAE (down to 8.45% share at $36.6 billion) and the Netherlands (5.25% at $22.8 billion), solidifying its position as India's top destination.

Data compiled from US Census Bureau, India's Ministry of Commerce, and OEC World. Note: Figures approximate FY ends (April-March).This US-centric boom was no accident. Post-2016, sectors like electrical machinery ($15.5 billion to US in 2024-25), pharmaceuticals ($10.7 billion), and gems/jewelry ($9.97 billion) thrived on American appetite. Engineering goods alone, a bellwether of India's manufacturing prowess, surged 26.88% of total exports, with the US as prime buyer. Exporters, flush with orders from Walmart, Target, and US jewelers, doubled down. "The US market was a cash cow—reliable, lucrative, and easy," recalls a Mumbai-based diamond exporter in a recent interview. But this focus came at a cost: vulnerability.

Ignoring the Red Flags: A Diversification Drought

As US exports soared, diversification efforts languished. Between 2017 and 2024, global imports expanded by $6 trillion, yet India captured just 2.4% ($146 billion), per Ideas for India analysis. The top five markets—US, UAE, Netherlands, China, Singapore—hoarded 38.9% in 2017 and edged up to 40% by 2024, with refined fuels propping up the Netherlands but little else shifting the needle.True, government initiatives like "Make in India" and free trade pacts with UAE and Australia nudged some progress. Exports to 15 key non-US markets hit $162 billion in 2024-25, growing at 19% annually—faster than the US's 15%. Seafood shipments pivoted toward the EU and Japan, while engineering goods eyed Latin America. Yet, these were baby steps. India's export basket remained concentrated: petroleum (13.86%), gems (vulnerable to US luxury demand), and textiles (labor-intensive, US-heavy). The Herfindahl-Hirschman Index (HHI) for market diversity barely budged from 1996-2017 levels, signaling stagnation.Exporters' myopic gaze? Blame the ease of the US market. "Why fix what isn't broken?" quipped a Tiruppur textile magnate in 2023, as orders flooded in. Geopolitical whispers—Trump's first-term steel tariffs in 2018—were dismissed as blips. Those early duties (25% on steel, 10% on aluminum) nicked $200 million in iron/steel exports but barely dented the overall 23% pharma boom or 38.9% half-year surge in 2016. India retaliated modestly, but the message didn't stick: diversify or die.

Sources: Ideas for India, World Bank, GTRI. Lower HHI indicates more diversification.This inertia wasn't ignorance but inertia born of success. As one FICCI president noted post-2018 tariffs, "We hoped for a quick deal." Instead, complacency reigned.

Tariff Thunderbolt: The 2025 Shock

Enter Trump's 2025 tariffs: a 25% "reciprocal" levy in July, doubled to 50% by August 27 as payback for India's $17 billion in discounted Russian oil savings since Ukraine's invasion. Hitting 66% of US-bound goods ($60.2 billion)—textiles, gems, shrimp, leather, carpets—the duties equate to an "embargo," per Nomura. Projections? Exports to US crater from $86.5 billion (FY25) to $49.6 billion (FY26), slashing GDP by 0.3-0.8%. Labor-intensive sectors, employing millions, face 70% collapse: $21 billion in textiles alone at risk, benching 250,000 workers in hubs like Tiruppur.Exporters were floored. "A huge setback—we're uncompetitive overnight," lamented Rakesh Mehra of the Textile Confederation. In Mumbai's diamond district, polishers eye salary cuts; Kolkata shrimp farmers decry Ecuador's 15% edge. "Peak season orders? Frozen," said a garment exporter, as US buyers pivot to Vietnam (20% tariffs) and Bangladesh. Stock markets dipped 1%, and FICCI's Harsha Vardhan Agarwal called it "unfortunate," pleading for a deal. Even pharma ($8.7 billion, exempt) frets spillover.The blindsiding? Exporters expected 10-15% hikes—absorbable. 50%? "Beyond capacity," per BBC interviews. Years of US fixation left no buffers: no deep ties in Latin America, scant EU penetration beyond fuels.

Lessons from the Wreckage: Time to Pivot?

Trump's tariffs aren't just economic—they're a geopolitical gut-punch, straining US-India ties amid H1B visa threats. Yet, history hints at resilience: Post-2018 duties, India's global share rose from 2% to 2.5%, exports doubled to $824 billion by 2024-25. Domestic demand (80% of GDP) and services exports ($300 billion projected CY24) cushion the blow.Still, the shock underscores a harsh truth: Dependence breeds disaster. As Piyush Goyal urges diversification to 50 West Asian/African markets, exporters must heed. Target EU FTAs, boost MSME aid, and invest in high-value goods. India's $2 trillion export goal by 2030 demands it—or risk more blindsides in a fracturing world.In the end, the US boom was a siren song. Indian exporters, enchanted, ignored the storm clouds. Now, with tariffs raging, the scramble for new horizons begins—not a moment too soon.