With the United States all set to impose a 25% tariff on Indian goods starting August 7, Indian exporters are feeling the pressure—and fast. Many in the industry have now turned to the government, urging it to step in and absorb at least part of the blow.
Their key demand is to expedite the rollout of the ₹2,250 crore Export Promotion Mission announced in the Union Budget for 2025–26.
But the mission, which is meant to help Indian exporters deal with global trade challenges, still remains stuck in procedural red tape. While it promises WTO-compliant support on trade finance and market access, actual rollout will only happen post Cabinet approval. And for that to happen, it must first clear the Expenditure Finance Committee.
According to an official in the know, the scheme’s launch will depend on “need and priority”, leaving exporters unsure of whether help will arrive in time.
Even as stakeholders demand compensation for tariff hikes, there’s no clarity on how—or if—the government can offer direct support. A subsidy-based solution is tricky. Not only would it be hard to measure real impact at the factory level, but it could also run into compliance issues with global trade rules under the WTO.
There’s also the risk of 'moral hazard'—a situation where companies may overstate their losses or operate inefficiently, expecting a government bailout. For now, no plan has been finalised, and officials say discussions around absorbing duties are still not on the table.
The US decision to impose higher tariffs on India follows the failure to seal a mini trade deal before the self-imposed August 1 deadline by US President Donald Trump. As a result, India will now face steeper tariffs than many other countries. And the fallout could be significant.
On August 2, commerce and industry minister Piyush Goyal met representatives from various export-heavy sectors including textiles, marine, engineering goods, leather, and processed food. But no immediate relief was announced.
A recent report by ratings agency ICRA suggests that sectors like textiles, auto components, chemicals, agrochemicals, tyres, and polished diamonds could be among the worst-hit. These are all heavily reliant on the US market.
To put it in perspective: 27% of India’s auto component exports go to the US. For cut and polished diamonds, that figure is 36%. And it's not just direct exports—any re-routing via Dubai or Israel might also fall under the scanner for transshipment tariffs.
Tyres and agrochemicals are in a similar boat. Tyres account for 17% of total exports to the US, and agrochemicals make up 18%. That means Indian firms may now find themselves at a disadvantage compared to regional rivals.
The Apparel Export Promotion Council has already sounded the alarm. Chairperson Sudhir Sekhri warned that factories might be forced to sell below cost just to stay open. Layoffs, he said, are no longer a remote possibility—they’re a looming reality.
The US is not just another trading partner, it’s India’s largest. In FY24, India exported goods worth ₹86.5 billion to the US, clocking an 11.6% growth from the previous year. Imports stood at ₹45.7 billion, giving India a handsome trade surplus of ₹40.8 billion.
But that figure could take a serious hit. The Delhi-based Global Trade Research Initiative (GTRI) has warned that India’s exports to the US might fall by as much as 30%, dropping to ₹60.6 billion in FY26.
On top of the tariff worries, exporters are also uneasy about possible penalties linked to India’s continued energy trade with Russia. While not yet confirmed, such a move from Washington would only add to the stress.