What the Data Reveals about India–US Trade Under 50% Tariffs
Insights on what the trade data signals about India’s negotiating space
In this episode, journalist and author Puja Mehra speaks with trade policy expert Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), about the impact of steep US tariffs on India’s exports and what the latest data reveals about the state of India–US trade negotiations. Drawing on sector-wise export trends, Srivastava explains the puzzling two-step trajectory in India’s exports to the US—a sharp initial fall followed by a partial recovery even as tariffs climbed to 50%—and outlines why this resilience may be driven by temporary adjustments.
He also examines whether India can realistically diversify away from the US market, why such shifts are slow and constrained by India’s export basket, and how global competition—particularly from China—limits alternative options. The conversation also touches on India’s recent spurt of free trade agreements, arguing that they reflect a revival of stalled negotiations rather than a fundamental shift in trade strategy. The discussion highlights why the India–US talks go far beyond a conventional trade agreement, touching on agriculture, domestic policy autonomy, and strategic concerns that India has consistently treated as red lines. Tune in for insights on what the trade data signals about India’s negotiating space, the costs of prolonged uncertainty, and the limits of compromise in a high-stakes economic relationship.
NOTE: This transcript is done by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on feedback@thecore.in.
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TRANSCRIPT
Puja Mehra: Mr. Srivastava, thank you for coming to the show.
Ajay Srivastava: Hi, thanks Puja for inviting me.
Puja Mehra: I'd like to speak with you today about India-US trade. We've seen the trade data for the past few months. Since first celebration day, tariffs were imposed and then they were raised further because of the penalty.
So I wanted to understand what impact the tariffs have had on India's exports to US. What are the trends? What does this tell us about what we could expect in future from India in the negotiations?
Is there resilience or are we seeing the need for India to step up and accelerate negotiations so that the deal can be completed quickly?
Ajay Srivastava: India's exports to the US, it shows a distinct two-step trajectory. First, a steep decline. Our exports from May to September saw a decline of 37.7%. And then from September to November, the exports saw an upward tick of 27%. Overall, between November and May, it's still down by 20.7%. But this two-step trajectory is very clear, not across one or two sectors, but across all the sectors that account for over 85% of India's exports to the US. Which means, if I give you an example, Gems and Jewellery exports, they were about $500 million in May 2025. They came to $200 million, sharp decline in September.
Then they rose again to $400 million in November. And this pattern, first a sharp decline and then a partial rise, is visible across the sectors, Gems and Jewellery, petroleum products, smartphones, other electronic products, textiles, ready-made garments, organic chemicals, across. So, it's surprising, but a pleasant development.
What surprises me more is not this, but you know, Indian exports, they faced 10% tariffs up to August 6th. Between August 7th and August 27th, tariffs were 25% in the US. From August 28th, tariffs were 50%.
And now they are 50% continuing since then. Our decline was steeper when tariffs were 10% or 25%. And now with full 50% tariffs, we are performing slightly better.
So, overall, we are down by 20.7%. But some uptick is there. We don't know whether the exports can sustain this uptick. We have to see that.
Puja Mehra: Mr. Srivastava, what is the reason, according to you, for this trend? The sharp decline was expected and is not counterintuitive, but this resilience in the 50% tariff phase, which is pretty much the highest tariff rate for any country. How is it that there is some recovery in this phase?
Ajay Srivastava: So, Puja, frankly, I have no idea of this. I tried speaking to the sectoral exporters, but I'm not getting any convincing reply. So, based on our understanding of the past events, this is how I persuade myself.
Initially, it was all a shock. So, people thought that exports to the U.S. will not be viable and they went down drastically. And then everybody sees that we are negotiating with the U.S. Even though the deal is not happening, almost every week some Indian official, minister or U.S. official or minister will be making a statement that the deal is near. So, I am given to understand that buyers and sellers, buyers from the U.S. and sellers from India, they are hopeful that the deal will come through, these tariffs, high tariffs will go. And currently what they are doing so that not to lose each other, they are dividing the losses among themselves. So, they're cutting on the profits, dividing the losses.
And that's the only thing, that's the only justification we can offer unless something explicit comes. Of course, one specific parameter I would like to mention here, for certain sectors, if tariffs are there, if products are entirely made in India, but suppose I am buying raw material from the U.S. and then I am processing it and sending the finished product to the U.S., then tariffs will be applicable only on the value-add part. Now, let's take the example of say, diamonds or gold jewellery.
If I am buying gold or diamonds from the U.S. and making gold jewellery or diamond ring out of that, then valuation is hardly 5% to 10%. So, this 50% tariff will be applicable on only this part. That explains the rise in, say, diamond sector.
And this can be applicable in many of the chemical sectors, certain technical textile sectors where people may be buying, say, cotton from the U.S. and exporting to the U.S. But this needs to be investigated further across more sectors. That explains how the exports are rising.
Puja Mehra: And is your sense that if the deal does not get concluded quickly enough, let's say it takes another three to four months or even five to six months, will this recovery sustain or will we see a change in the trend?
Ajay Srivastava: No, I think this will not sustain because nobody for a long time can survive on 50% tariffs and our products are low-valued. For example, for ready-made garments, the labour content itself is 42-45%. And with 51% tariffs and lower tariffs on goods from China, goods from Bangladesh, then we will not stand a chance.
And right now, people from both the sides are taking a chance in anticipation. But if the deal doesn't happen for the next few months, then I think they may lose hope and exports may go down.
Puja Mehra: And simultaneously, we've also been hearing that the government would like exporters to look for diversified markets. Based on this data, do you think that is, one, feasible because it takes time to build new markets by displacing current market holders? And two, even if it was possible, will that compensate, you think, for any loss that might happen in the US trade, in the US trade, going by the trend that we've seen so far when there was a loss happening?
Ajay Srivastava: First, I'll give you a data, happy data. So, as we discussed, our exports to US between May and November are down by 20.7%. But during this period, our exports to the rest of the world, world minus the US, they're up by 5.5%. That means there is some diversification away from the US. Very minor, but still some diversification is there.
As a result, India's total merchandise exports are down by just 0.5%. So diversification is happening. But we must understand that diversification, easy to talk, but difficult to accomplish at a large scale in merchandise trade. Three, four things are there.
For example, US or European Union, they're big markets. You talk to very integrated retail chains, you talk to two, three, four buyers, and you can reach the entire country, entire continent. That's not the case with, say, Latin America or Africa, or even Russia and similar countries, Gulf countries.
So it's difficult to achieve diversification in a short time. Selling is always easier if you are having a quality product to US or European Union. Second point is that India is not the only country facing US tariff.
Everybody is facing high or low. So everybody is trying to diversify, seeking alternate markets. And China, as usual, I read somewhere that China is offering 36 months of credit for supplies to African countries.
We cannot. Our exporters don't bring money within 12 months. They fall foul of our regulations also.
Anyway, we don't have the capacity to wait so long for realising the money for our exports. And China is offering so many other concessions also. So diversification, somewhat it's happening, but I don't see it happening on a big scale.
For it to happen on a big scale, that will take years and will happen only when we change our export basket products drastically, we improve that. Right now, the current level of export basket, I don't think we have much chance of massive upgradation.
Puja Mehra: And Mr. Srivastava, policy makers and trade negotiators who are looking at the data that you've just discussed, Indo-US trade data, how do you think it would add to pressure or give them actually more time to conclude the negotiations? What I'm saying is that, is this trend helping them or is it making it more difficult for them?
Ajay Srivastava: I think this has no bearing on the outcomes or in the process of negotiations, because everybody in India and US know that exports will fall with their 50% tariff. They are falling at a slower pace. But you know, this trade deal is very different than the normal free trade agreements we sign.
Here, trade component, I convince myself, is less than 50% in importance. US, what US wants is not only opening of trade, they also want you to dilute many of your domestic policies. For example, they want free flow of data, they want your nuclear policy to align with their policy.
They want you to allow their e-commerce firms to sell using platform pattern of selling. We have been opposed to all these things, but they are pressurising all these things. They're also talking about accepting GM foods, maybe for fuel purposes only, corn or soya or maize.
And the free position is that if we look at the data, 95% of the US exports to India, they're industrial products. India has no problems in making tariff zero on all these products. So for 95% of their exports, tariff can be made zero easily by India.
But they're not happy. They want all the agricultural products. For agriculture, we can give some concessions on say their exports of almonds or apples here and there, but we can never compromise or open the markets for wheat, rice, coarse grains.
Basic agriculture, we can't. It's never a trade subject for us, it's the matter of livelihood of 70 crores of people who are depending on all these things. So because of all these things, so trade for me is a minor issue.
They want everything else, including they want us to buy more of their aircrafts, more of their technology. So Mr. Trump is using the name of trade deal to push his strategic agenda. So that's why this deal is taking place.
My friends ask me why India is taking so much time when others like Europe, Japan, Malaysia, they have done the deal in almost weeks. So my answer is very simple. All of these people are dependent for their security needs on US.
We are not. China is not. So Europe is dependent on US via NATO.
Japan and South Korea, US Marines are housed there physically. Same with Philippines, same with Malaysia. So all these countries, their security-wise, they are totally dependent on US.
That's why we see one-sided deals. That is why Mr. Trump, he expects one-sided deal with everybody else also. That's not coming.
It didn't come from China. It's not coming so far from India.
Puja Mehra: I see that and fully agree with you. My point was that by prolonging the negotiations, I don't know which side is doing it, but when negotiations get prolonged, my sense was that over a period of time, the Indian side begins to hurt a little more because some of the sectors such as textiles, etc. are quite employment intensive.
And like you're saying, this resilience may not sustain for very long and then it becomes a question of livelihoods of a large number of people. That's why I was asking what happens if this trend that the data is showing continues and it takes time to conclude the negotiations.
Ajay Srivastava: So hurt is only from one side. India is getting hurt because US has imposed tariffs and we have not taken any countermeasures against the US. So hurt is only for the Indian side.
But the only thing is that if at all we have a deal, it should have a balanced deal. We cannot sacrifice our agriculture. We cannot sacrifice our strategic security concerns for a deal.
Suppose there is no deal, then the US is an important partner for us. 20% of our merchandise exports go there. So it will be a problem.
But bigger problem will be if we do a deal which jeopardises our basic security and strategic concerns.
Puja Mehra: Yeah, no, I absolutely see that. I keep wondering what it is that India can offer for the US to take its focus away from these red lines that we have drawn and settle for something else instead. And I never really get any answers.
I keep asking this question. What it is that we can offer to the US that will compensate for not spending these red lines that we have put to them?
Ajay Srivastava: So it's a trade deal and we're willing to eliminate tariffs for 95% of their exports. It should make them happy. We are even willing to go further 97-98% by offering some part of agriculture like avocados or apples or almonds, those.
Not wheat or rice or maize or GM foods or dairy. That's a no-go. So we have offered, India offered the most flexible deal.
See, there is no official world from both the sides what is being exchanged. But we understand we offered the best deal possible. We have not offered such a liberal deal to any of our partner countries so far.
But as we discussed, it's not merely a trade deal, it's a trade deal plus plus plus plus. And Mr Trump may keep adding things over the drop of a hat. Not today you sign a deal and tomorrow he may come with something new.
We should be very ready with that. They have signed a deal with the European Union and yesterday I read Mr Trump is threatening Macron that he will be imposing more tariffs. So it's all in a flux.
We should be flexible but not beyond a point. If pain is there, we'll suffer the pain.
Puja Mehra: Right. And do you think India will offer these concessions that you're saying 97% of the trade with the US could probably be offered at 0% tariffs. But would it make sense to do it only for US or would it make sense to do it across the board for all trade so that then US exporters have to compete with everybody else to export to India?
Ajay Srivastava: Right now we are talking about US only. Let's see what materialises because most of these things are our guesses based on some reason, some understanding, some information. But we really don't know what's happening on the board.
Nobody knows this. None of the sites is talking about these things.
Puja Mehra: Yeah, because so far whatever concessions we've offered, we've done it across the board. Like when we did it in February last year's budget, we offered some concessions. We announced it for everybody, not just for US.
Ajay Srivastava: No, if we're cutting tariffs at the MFN level, we do it for all. But all our FTAs, we offer concessions tailor-made to the partner country. For example, with New Zealand, we are offering to allow import of apples for certain quantities.
We have not allowed this to most other FTA partners. So it's all country-specific.
Puja Mehra: In fact, that was going to be my next question and my last question, which is that for some time in between, we were not signing any FTAs. But now there is a lot of hectic signing of FTAs. Do you see this as a basic approach, change in approach to trade?
Or is it a basic change in the way the FTAs are being designed, which is therefore satisfactory, more satisfactory than the earlier FTAs?
Ajay Srivastava: About three years back when I was with the Commerce Minister, I was most of these FTA agreements. So, you know, there is no change in approach. We were negotiating with Australia also, New Zealand also, Europe also, before 2014 also.
But then we started negotiating RCEP and we thought Australia, New Zealand, they are part of the RCEP. So why negotiate separate agreements with them? They are part of the RCEP.
Then RCEP somehow did not materialise in 2019. That was the reason. So these were open in 2021.
Again, when we started signing Mauritius, we started with Mauritius in early 2000. Then we signed with UAE. UAE and UK were totally new.
Rest were all old agreements which were kept pending, which were pending for some reasons. And now they are being revived and signed one by one. I don't see any new strategy.
It's just continuation of the old strategy.
Puja Mehra: I mean, like for instance, EU and even UK, which was sort of dragging a bit. It was taking very long. And now UK got concluded already.
EU, it is being negotiated at a faster pace. So is it because there is pressure because of what is happening with US or it's just the natural progression of the negotiations?
Ajay Srivastava: So I thought EU negotiations started in 2007, continued. Well, we were almost near conclusion in 2013. Then they got derailed because both the sides, they were not happy with each other's offers.
Then they were open in 2017 again, off and on were there. And now I think not only India, Europe also is facing pressure from the US and they feel whatever market access they can derive from world apart from US, they should expedite those agreements. And I will agree with you that maybe US is dangling tariffs in front of everybody.
It may be a reason that other countries are expediting their pending free trade agreements.
Puja Mehra: Right, right, right. So yeah, those are the things I wanted to ask you about, especially because of what is happening with the US that puts sharper focus on trade with all the other countries as well. And it helps us understand.
The data, I think, is the best guide. Actually, we keep discussing other things. Thank you so much for helping us understand the data.
Ajay Srivastava: Most welcome, most welcome.
