India Pivots to Asian Markets to Offset Impact of New US Tariffs

2026-01-16 global

New Delhi, Friday, 16 January 2026.
As US tariffs bite, India’s exports to China surged 67 percent in December. This strategic pivot demonstrates resilience, with overall merchandise exports rising despite protectionist headwinds.

Resilience Amidst Protectionist Headwinds

Official data released on Thursday, January 15, reveals a stark realignment in India’s trade trajectory as the nation navigates a volatile global landscape. While shipments to the United States—New Delhi’s largest export market—contracted by 1.8 percent to $6.89 billion in December, overall merchandise exports managed to climb 1.87 percent to $38.51 billion [2][3][5]. This growth, occurring despite the imposition of 50 percent tariffs on specific Indian goods by the Trump administration in late August 2025, underscores the efficacy of India’s diversification strategy [1][2]. The data indicates that while the “America First” policies are biting, they have not paralyzed India’s export engine, which is finding new momentum in Asian markets [1].

Navigating the Tariff Wall

The friction with Washington has had a tangible impact, yet the damage appears contained to specific sectors. The steep 50 percent tariff regime, which affects approximately 55 percent of exports to the US, has weighed heavily on labor-intensive industries such as textiles, chemicals, and leather [1][2]. However, Commerce Secretary Rajesh Agrawal noted that India has “held on well,” largely because high-growth sectors like electronics remain outside the tariff net [2]. Consequently, electronic goods exports surged 16.78 percent in December, providing a critical buffer against declines in traditional segments [2]. While the tariffs have introduced stress, the robust performance of exempt sectors suggests a structural shift toward higher-value manufacturing in India’s export basket [2][6].

A Geopolitical Realignment

Perhaps the most striking development is the rapid acceleration of trade with China. In December alone, exports to China skyrocketed by 67 percent to reach $2 billion [3]. This surge has contributed to a broader shift in trade geography; between April and December 2025, India’s total trade with China stood at $110.20 billion, surpassing the $105.31 billion traded with the United States [1][3]. While New Delhi maintains a trade surplus of over $26 billion with the US, its deficit with China remains substantial at $81.7 billion for the same period [3]. Beyond the Asian giant, India is actively widening its map of trade allies. Shipments to the United Arab Emirates, Hong Kong, and Spain have posted strong growth, and Africa is increasingly viewed as a vital market for pharmaceuticals and engineering goods [1]. This “quiet but important recalibration” suggests that New Delhi is spreading its risk across Asia, the Middle East, and Africa rather than reacting defensively to American protectionism [1].

Balancing the Books

Despite the export resilience, the trade balance remains under pressure. The merchandise trade deficit widened to $25.04 billion in December, up from $24.53 billion in November and $20.6 billion a year prior [1][4][5]. This expansion was driven by an 8.7 percent increase in imports, which rose to $63.55 billion during the month [5]. Looking ahead, the government remains optimistic about hitting its targets. Secretary Agrawal projected that total exports of goods and services could exceed $850 billion for the fiscal year ending in March 2026 [1][2]. Furthermore, diplomatic channels remain open; officials indicated on January 15 that India is “very near” to finalizing a trade agreement with the US, and similar progress is being made with the European Union [2][3].

Sources

Supply Chain Trade Policy