India’s export sector is facing a significant challenge as the United States imposes steep tariffs—up to 50%—on a broad range of Indian goods. The Federation of Indian Export Organisations (FIEO) has issued a sharp warning that these punitive tariffs are rendering Indian products uncompetitive in the crucial US market, with serious implications for the country’s export-driven economy.

This development is rooted in ongoing geopolitical tensions, particularly India’s continued purchases of Russian oil, which has drawn a retaliatory response from the US in the form of these harsh trade barriers. The tariffs affect approximately 55% of India’s shipments to the US, which is one of the largest and most vital export destinations for Indian businesses.

The Global Trade Research Initiative (GTRI) has projected a worrying outlook, estimating that Indian exports to the US could see a drastic drop of around 43% in the fiscal year 2025-26, shrinking to roughly $49.6 billion from previous levels. This contraction poses a massive threat to Indian exporters, especially Micro, Small, and Medium Enterprises (MSMEs), which constitute a significant portion of the export ecosystem.

MSMEs, often characterized by limited financial resilience and dependency on export markets like the US, find themselves particularly vulnerable. The steep tariffs make it difficult for these smaller players to compete on price, pushing many towards potential losses or even exit from these markets. The economic ripple effects could be far-reaching, affecting employment and economic growth across various sectors.

In cities that are key export hubs, such as Mumbai, the impact is tangible. Industries including gems and jewellery, textiles, and electronics are already feeling the pressure as customers shift to cheaper alternatives or pause purchases altogether. For instance, the gems and jewellery sector, which exports goods worth billions to the US, faces the risk of losing market share built over many years.

While India has made efforts to diversify its trade partnerships, including opening avenues with countries like the UK and Australia, the US market remains indispensable due to its size and purchasing power. The imposition of 50% tariffs by the US threatens to undo years of painstaking efforts by Indian exporters to establish a strong foothold.

The issue has sparked calls for urgent government intervention to support affected exporters, whether through diplomatic efforts to resolve the dispute or through domestic measures such as financial aid, incentives, or alternative market development.

For investors and market watchers, this development adds a layer of complexity to the Indian market outlook. Exporters sensitive to US market demand may see volatility in their stock performance, and broader market sentiment could be influenced by concerns over external trade relations.

In conclusion, the imposition of these steep US tariffs presents a formidable challenge to India’s export sector. The FIEO’s warning serves as a critical alert to policymakers, businesses, and investors alike regarding the need for strategic responses to protect and sustain India’s export growth in a rapidly evolving global trade landscape.