India reroutes exports as US tariffs bite, finding new trade lanes in Asia and Europe

India’s export economy is undergoing a forced realignment. Two months after steep US tariffs — some as high as 50% — took effect on August 27, exporters are racing to redirect shipments to new geographies.

Early trade data suggests that while marquee sectors such as gems and jewellery, marine products and auto components are finding alternative buyers across Asia and Europe, labour-intensive, low-margin categories remain exposed and vulnerable.

Government data shows a dramatic shift in destinations. Gems and jewellery exports to the United States crashed 76% in September compared with a year earlier, yet the sector’s overall decline was marginal — only 1.5% — thanks to a surge in shipments to the United Arab Emirates (up 79%), Hong Kong (11%), and Belgium (8%).

A similar pattern is visible in auto components. While exports to the US slipped 12% in September, rising orders from Germany, Thailand, and the UAE helped the segment clock an overall 8% growth.

Marine exports are emerging as one of the strongest stories of adaptation. Shipments jumped 25% in September and 11% in October, powered by higher demand from China (up nearly 60%), Japan (37%), Thailand (around 70%) and the European Union.

This redirection, officials say, signals that India’s widening trade linkages may partially absorb the tariff shock — at least in the short term.

Winners and casualties of realignment

But the resilience is selective — and uneven.

Sectors already battling low margins and intense competition from China and ASEAN peers are facing shrinking options. Cotton garments, sports goods, carpets and leather footwear — industries dominated by small and medium units — are showing signs of stress.

Sports goods, 40% of which go to the US, saw no meaningful rerouting and recorded a 6% export decline in October. Cotton garments recorded a 25% drop in shipments to the US, and despite gains in UAE, Saudi Arabia, Spain and Italy, exports still slipped 6%. Leather footwear exports also slid by 10% after a sharp fall in US orders.

Shrimp — the powerhouse of India’s seafood basket — is among the hardest hit. The category generated $4.88 billion in FY25, accounting for over 65% of seafood exports and operates on razor-thin margins. “The tariffs hit the most vulnerable first,” a senior official acknowledged.

Govt pushes new markets and warns against price war

With the export map being redrawn, the Commerce Department has directed exporters to avoid deep price cuts while entering new territories — a move meant to protect pricing power and avoid a race to the bottom.

The government is accelerating market access approvals: 102 additional Indian marine units have recently been cleared to supply the European Union — the first such expansion in five years — bringing the total eligible facilities to 604. Approvals for Russia are next, with at least 25 fisheries units expected to be cleared soon.

If India concludes its ongoing FTA with the EU, tariffs there — currently around 12% — could drop sharply, opening a major new corridor. The EU already imported $1.1 billion worth of Indian seafood in FY24, and government estimates suggest a potential 20–25% increase once new permissions stabilize.

Supporting these efforts is a government financial package worth ₹45,060 crore, including ₹20,000 crore in credit guarantees.

Exports rerouted — but not fully replaced

Despite early gains, the scale of redirection remains limited. Officials estimate that roughly $2 billion worth of shipments may find new homes — a fraction of the more than $8 billion India historically exported to the US before tariffs.

Yet there are hints of a broader supply-chain ripple. Some countries that are now buying more from India appear to be exporting larger quantities onward to the US — suggesting India may be feeding “indirect exports” via re-routing hubs like Hong Kong, Vietnam, Thailand, Australia and the UAE.

An SBI Ecowrap analysis supports the trend. It notes that between April and September, India’s merchandise exports grew 2.9%, and shipments to the US still showed a 13% cumulative rise — likely due to pre-tariff front-loading. But September US-bound volumes have now turned negative.

The new trade reality

Container traffic data tells a clear story: shipments from India into the US dropped 18.4% in October, the steepest among major exporters. China also recorded a 16.3% decline — while Indonesia, Thailand and Vietnam saw volumes rise (10.1%, 3.6% and 3.6%, respectively).

The world’s supply routes are shifting — and India is learning to navigate the new terrain.

For now, diversification remains a work in progress: encouraging for high-value exports, difficult for labour-dependent industries, and uncertain until trade negotiations with Washington find a resolution.

But one thing is clear — India’s exporters are no longer waiting for the US market to reopen. They are already mapping the next trade frontier.