Trump’s tariffs threaten over $350 million of exports, force Indian MSMEs to de-risk from US
NEW DELHI : India’s MSME exporters are scouring for other destinations as US President Donald Trump’s tariffs threaten the margins of smaller players who have already spent the better part of FY25 grappling with the after-effects of wars and the crisis at the Red Sea. At stake is more than $350 million in exports.
Moneycontrol spoke to nearly a dozen of Indian exporters, companies and port operators who highlighted the pressure by US clients for discounts since Trump’s baseline tariff of 10 percent kicked in on April 5.
Customers in the US want the Indian side to largely or in some cases entirely absorb the hike arising from steeper levies.
Executives from top Indian ports indicate that shipments worth over $350 million from India to the US are currently at risk due to a stalemate in negotiations between Indian and American companies.
“Smaller exporters to the US do not hold the negotiating power and will also struggle to bear the cost of sending shipments to America if their margins fall significantly due to the tariffs imposed and, hence, have started eyeing alternative markets for their shipments,” Anand Sharma, Director at Mantrana Maritime Advisory Pvt Ltd, a Mumbai-based consultancy firm, told Moneycontrol.
While Trump on April 9 paused the country-specific tariffs on all nations, barring China, including an additional 16 percent reciprocal levy on India, the baseline tariff of 10 percent and certain sectoral duties on steel and aluminium have started to spell trouble for Indian exporters.
This is significant given that the US is the top buyer of Indian goods. In 2024-25, it again emerged as India’s top export destination, showcasing a growth in shipments of 11.6 percent on-year to $86.51 billion, while America was India’s fourth-largest import source nation at $45.33 billion, up 7.4 percent.
“US clients want Indian exporters to take the load of the 10 percent baseline import duty by the US and sectoral duties on steel and aluminium. Shipping time is 60 days so there is no way that shipments can be held or hurried,” an industry source told Moneycontrol.
A senior executive at one of India’s largest ports said that Indian exporters are being forced to call back shipments as negotiations break down with US clients.
“Importers in the US are arm-twisting small and medium Indian companies by refusing to pay extra after the US has imposed a 10 percent import tariff on all its trading partners, which has left exporters benching their in-route shipments in the Middle East and Africa,” this person told Moneycontrol, on condition of anonymity.
Govt’s advice to exporters
The Ministry of Commerce and Industry has asked Indian exporters to not give in to the demands of their clients in the US, but smaller exporters are in a fix as withholding goods to avoid higher prices would hit cash flows and margins as well.
“Minster (Piyush) Goyal has asked us to not give any discount to them. But, if you have material lines to be shipped to the US, you cannot hold on to it. If we hold, it will hit our shipments. When it comes to other goods, exporters rather do it at 10 percent, use the three-month window to ship as much so our exports will not be hit,” an industry representative for a key export lobby said.
The government is hopeful that the ongoing negotiations for a trade deal with the US will not only lead to securing an exemption from Trump’s reciprocal tariff of 26 percent on India but will make way for lower duties between the two nations, thus spurring Indian exports to America as well.
India and the US are looking to conclude negotiations for the first tranche of the proposed bilateral trade agreement (BTA) well before the agreed timeline of the autumn of 2025, after both nations signed the terms of reference for the pact, the commerce ministry said on April 15.
One government official said that India is looking to close talks for the first tranche of the BTA with the US as soon as possible, keeping in mind the 90-day tariff pause announced by Trump.
Newer avenues
Faced with the uncertainties around Trump’s tariffs, Indian exporters are now looking at new destinations for their goods, notably Latin and Central America and North and West Africa
“Especially for MSME exports, we have to move away from the US and go for alternative destinations. We have to de-risk Indian exports from the US and we will need credit insurance from the government as we explore newer markets,” the industry executive cited above said.
The senior executive from one of India’s top port operators said that Indian exporters are also exploring markets like Thailand, Australia, United Arab Emirates, Saudi Arabia, South Africa and New Zealand as alternatives to the US.
However, the country’s apex trade lobby EEPC India warns that securing substitute destinations for Indian exports will not be an easy task.
“Competition in markets like Latin America, Central America, the Middle East and Africa is set to heat up as exporters explore new markets and further penetrate the existing ones. This could dent profit margins, leaving little funds for investment. At this juncture, we need constant support from the government, both fiscally and for making inroads in new markets,” EEPC chairman Pankaj Chadha said.
From steel to textiles
Trump’s steeper tariffs have especially hit small and medium Indian exporters of textiles, carpets, automobile parts, marine products, furniture, and steel and aluminium, multiple sources told Moneycontrol.
Given America’s 25 percent sectoral tariff on steel and aluminium goods, Indian exporters are grappling with the tough choice of whether or not to pass on the hike in prices to customers.
“On steel and aluminium there will be no reprieve, we are figuring out with customers what to do. For engineering exports, $4–5 billion shortfall likely in FY26. The biggest problem for steel is that tariffs of 25 percent are in for the orders in hand, not talking of new ones. Who will take the hit, will customers take the hit?” the industry representative cited above said.
The impact of the ongoing trade tariff war is already visible with the value of Indian engineering goods exports declining by nearly 4 percent year-on-year to $10.82 billion in March compared to $11.27 billion in the same month last year.
“Furniture and carpet shipment worth around $100 million, and textile shipment worth $120 million from India are currently facing uncertainty in getting delivered to the US as discussions have not reached a conclusion,” another senior executive from a top Indian port said, adding that marine exports worth $60 million and automobile parts worth $30 million are also facing delays in deliveries to America.
When it comes to textiles, US clients have suggested Indian exporters to either split the 10 percent baseline tariff or bear the full cost.
Exporters of seafood too are bearing the brunt of Trump’s trade policies, and are precariously placed given that their produce is perishable.
G Pawan Kumar, president, Seafood Exporters Association of India, earlier this month said that the reciprocal tariffs announced by Trump will have an adverse impact on exports to the US market, valued at $2.5 billion in 2023-24.
Out of the total seafood exports to the US, shrimp accounted for the lion’s share at 92 percent, making India the largest supplier of this product to America.
Kumar underscored that the value of the higher tariffs expected to be borne by Indian exporters of shrimps is estimated at around Rs 600 crore, adding that exports of an equal value were currently waiting for shipment in cold storages.
In 2024-25, India’s main exports to the US included drug formulations and biologicals ($8.1 billion), telecom instruments ($6.5 billion), precious and semi-precious stones ($5.3 billion), petroleum products ($4.1 billion), gold and other precious metal jewellery ($3.2 billion), ready-made garments of cotton, including accessories ($2.8 billion), and products of iron and steel ($2.7 billion).
Source : Moneycontrol