In a significant blow to India US trade, a new report by the Global Trade Research Initiative (GTRI) has revealed a sharp decline in India's merchandise exports to the United States. According to the analysis, exports plummeted by a staggering 22.2% between May and August 2025, falling from $8.8 billion to $6.9 billion. This downturn is directly linked to the implementation of new US tariffs on Indian goods, which were progressively increased from 10% in early August to a steep 50% by the month's end, creating a challenging environment for Indian exporters.

A more concerning revelation from the GTRI report is the unexpected contraction in categories of goods that are entirely exempt from the new tariffs. These tariff-free exports, which comprise nearly 30% of India's shipments to the US, saw the most significant fall, dropping by 41.9%. A prime example is the export of smartphones, a major Indian commodity to the US, which fell by 58% despite not being subject to any tariffs. This indicates that the impact of the new trade policy is broader than initially anticipated, affecting market confidence and supply chains even for goods not directly targeted.

The report highlights a particularly severe impact on key labor-intensive sectors, which form a substantial part of India's exports. The largest segments, including textiles, gems and jewelry, and seafood, have been hit the hardest by the 50% tariff. Specifically, exports of textiles and garments saw a 9.3% decline, while seafood exports, especially Vannamei shrimp, were more than halved. These figures underscore the vulnerability of these industries and the potential for widespread job losses if the trend continues.

Looking ahead, the GTRI report cautions that this sustained decline, particularly in the tariff-free categories, poses a direct threat to India's ambitious production-linked incentive (PLI) schemes and other policy measures aimed at boosting domestic manufacturing. In light of these findings, industry bodies have urged the Indian government to introduce targeted export relief measures to help businesses navigate the new trade landscape and mitigate the negative economic fallout.