India mobilises RBI support and diversification plan to counter US tariffs on exports

The Union government is rolling out support for Indian exporters hit by steep US tariffs on Indian goods. A 50% duty on key products has raised prices in the American market. This has hurt competitiveness in textiles, seafood, gems and jewellery, and engineering, where the US remains the largest buyer.

Between May and October 2025, exports from India to the US declined sharply, according to official trade data. Shipments fell from $8.83 billion to $6.31 billion in five months. The drop of about 28.5% translated into an export value loss of nearly $2.52 billion.

New Delhi is using a multi-layered policy response to limit the damage from higher US tariffs on Indian exports. Minister of State for Commerce and Industry Jitin Prasad said the plan includes talks for a balanced trade arrangement with Washington. Support also comes through Reserve Bank of India measures and a government-backed credit guarantee scheme.

The RBI has introduced trade relief steps aimed at easing liquidity stress for exporters facing higher landed costs abroad. Under the credit guarantee framework, banks can extend collateral-free loans to exporters because part of the lending risk shifts to the government. This structure is designed to keep credit flowing during the period of tariff disruption.

The US tariff escalation on Indian exports was staged over several months rather than applied at once. Duties started at 10% in April, increased to 25% in August, and reached 50% by late August. The final rate includes a 25% punitive tariff linked to India’s purchase of Russian oil, which the US argues funds the war against Ukraine.

Higher US tariffs on Indian exports have raised final prices for American buyers across several product lines. For textiles, items such as cotton yarn, ready-made garments, and home textiles now bear a 50% duty. A shirt valued at $20 before tariffs now lands at $30 in US stores, reducing consumer appeal and squeezing order volumes.

Seafood, especially shrimp, has also become costlier in the US market under the 50% duty slab. This comes at a time when shrimp and other seafood products bring in billions of dollars in export earnings each year. Gems, jewellery, and engineering goods face similar price pressure, adding to the broad-based export slowdown.

US tariffs on Indian exports, trade basics and domestic offset plans

Tariffs are extra taxes charged by an importing nation on goods coming from abroad. When US tariffs on Indian exports rise, landed prices increase for buyers in America. Costlier products tend to lose market share to cheaper suppliers from other countries or to local producers within the US.

New Delhi is counting on domestic policy changes to partly counter lost export demand from the US. Goods and Services Tax reforms are expected to support stronger local consumption. Higher consumption can help absorb some production that might otherwise be exported, giving producers a partial cushion against external shocks.

Alongside relief for working capital through banks, authorities are also focusing on longer-term resilience. Officials say a key goal is to ensure exporters can handle sudden rule shifts in large markets. That includes foreign policy-linked measures such as the additional 25% punitive tariff related to Russian oil trade.

US tariffs on Indian exports and long-term diversification strategy

India is expanding its export strategy so that dependence on the US reduces over time. The number of priority markets is planned to rise from 20 to 50 countries. Target regions include the Middle East, Africa, Latin America, and Europe, together accounting for around 90% of current export volumes.

The Union Cabinet has cleared a six-year Export Promotion Mission with total funding of ₹25,060 crore. Under this mission, exporters will also be able to draw on collateral-free credit worth ₹20,000 crore. The objective is to help businesses build presence in new markets and lessen vulnerability to sudden tariff hikes.

The diversification push aims to spread risk across more destinations while keeping the US as a key market. By combining financial support, policy reform, and market expansion, authorities are seeking to stabilise export earnings. The effectiveness of these measures will depend on both global demand and future US tariff decisions.

The recent US tariffs on Indian exports have clearly weakened shipments in several major sectors within months. Government responses range from RBI-backed credit relief to a large-scale Export Promotion Mission and wider market outreach. Together, these steps are structured to limit immediate losses and strengthen India’s export position against future policy shocks.