How $48 Billion in Indian Exports and Small Businesses Benefited from the US Tariff Cut
For much of 2025, India’s export sector was pushed into a corner by an unprecedented escalation of US tariffs. In a phased move, duties on Indian goods entering the United States climbed from already elevated levels to as high as 50 percent. This was not a marginal increase. It was a shock that threatened the commercial viability of nearly $48.2 billion worth of Indian exports, more than half of India’s total merchandise shipments to its largest export market. For exporters, especially small and mid-sized ones, the situation was not theoretical. Orders were at risk, margins were wiped out, and entire production clusters were staring at a slowdown that could have turned into mass layoffs.
This context is crucial to understand the significance of the recent US decision to lower tariffs on Indian goods to a flat 18 percent. The move is not a celebratory breakthrough or a grand free trade agreement. It is a rollback from an unsustainable position that had begun to damage both trade flows and economic stability. The relief matters precisely because the earlier tariffs were so extreme.
India exported roughly $79 billion worth of goods to the US in the last full financial year. Of this, government estimates showed that about $48.2 billion in exports were directly exposed to the highest layers of tariffs imposed during 2025. These included labour-intensive and manufacturing-heavy sectors such as textiles and garments, gems and jewellery, leather and footwear, marine products, chemicals, machinery, and auto components. These are not fringe sectors. They form the backbone of India’s manufacturing export economy and support millions of jobs across the country.
Before the rollback, the tariff structure had become punitive. Indian exporters were dealing with a combination of base duties, a 25 percent reciprocal tariff introduced earlier, and an additional 25 percent penalty linked to geopolitical considerations. In many cases, the total landed duty crossed 50 percent. In comparison, competing exporters from Vietnam, Bangladesh, and parts of Latin America were facing significantly lower tariffs, often below 20 percent. This disparity made Indian products instantly uncompetitive, regardless of quality or reliability.
The impact was most severe on small and mid-size exporters. Large corporations can absorb temporary margin shocks, diversify markets, or renegotiate contracts. MSMEs do not have that luxury. They operate on thin margins, depend on predictable order cycles, and often rely on a limited number of overseas buyers. Studies conducted during the peak of the tariff escalation warned that MSME-dominated sectors could see export contractions of over 40 percent if the tariffs continued. In textiles, clusters such as Tiruppur, which accounts for nearly a third of India’s garment exports to the US, faced the prospect of losing orders overnight. In gems and jewellery, where small units dominate processing and value addition, tariffs above 50 percent threatened to hollow out an industry that employs hundreds of thousands of workers.
The economic spillover was equally worrying. Analysts estimated that prolonged tariffs at those levels could shave between 0.3 and 0.5 percentage points off India’s GDP growth and directly endanger millions of jobs tied to export manufacturing. For an economy where exports contribute roughly one-fifth of GDP when goods and services are combined, the risk was systemic.
Against this backdrop, the shift to an 18 percent tariff is a meaningful correction. While it is still higher than what many exporters would ideally want, it brings Indian goods back into a competitive range. For US importers, the reduction sharply lowers landed costs, making Indian suppliers viable again compared to alternative sourcing destinations. For Indian exporters, it restores predictability. Orders that were on hold or at risk of being diverted can now be retained. Cash flows stabilise, and production planning becomes possible once again.
The sectoral benefits are broad. Garment exporters regain pricing room in a market that is extremely sensitive to cost changes. Jewellery exporters see relief from a tariff burden that had made even high-value products unattractive. Leather, footwear, seafood, chemicals, and engineering goods, all of which rely heavily on MSME participation, benefit from a tariff reset that directly affects their survival in global supply chains.
It is also important to be clear about what this deal does not do. Despite widespread domestic concern, there is no evidence that India has opened its agriculture or dairy markets as part of this arrangement. These sectors were explicit red lines during negotiations, given the scale of rural livelihoods involved, the distortionary impact of heavily subsidised foreign farm products, and long-standing cultural and food-security considerations. The tariff relief focuses on Indian exports entering the US market, not on lowering barriers for sensitive imports into India.
Seen in the right light, this trade deal is not a triumph but a stabiliser. It prevents further damage to a critical segment of the Indian economy and pulls back from a tariff regime that was economically counterproductive. The real beneficiaries are not boardrooms or headline trade statistics. They are small factories, export clusters, and workers whose livelihoods depend on continued access to global markets.
In an era of volatile trade politics, the lesson is clear. Export resilience cannot depend on a single market or on the assumption of stable trade rules. But when shocks do occur, timely course correction matters. By restoring viability to $48.2 billion worth of exports, this tariff rollback has bought India’s small businesses something invaluable: breathing space.
