Tariff tantrums shape Indian exports in the 21st century

The first of a two-part series looks at India's export options: Tariffs are pushing a move towards diversification even as shipments to the US increase. It could be a win-win

- YASH KUMAR SINGHAL

India has reached a critical juncture in its international trade journey, with US President Donald Trump's 50 per cent tariff on Indian goods exports prompting a rush for new markets in a world where every other country is scrambling, too.

Although India’s dependence on just a few export markets over the years has been an issue in itself, the tariffs introduced a new urgency to export diversification plans.

Trade Minister Piyush Goyal has held discussions with export promotion councils and industry associations to take stock of the efforts being undertaken to diversify India’s export market, backed by a pipeline of proposed free trade agreements (FTAs).

Is the US a monopsonist?

In economic theory, monopsony occurs where there is only one buyer of goods or services — for instance, a large factory with a township around it is the only meaningful buyer of labour from the town. Similarly, the US has been the largest buyer of goods from other countries for a long time. In 2024, the US accounted for nearly 14 per cent of global imports — its highest share since 2016.

Currently, major world economies are negotiating and trying to eke out trade deals with the US to secure one of their biggest export markets, even as they explore fresh export destinations.

Among the top 10 merchandise exporters to the US in 2024, Mexico and Canada had the highest export dependence on the US, with 81.31 per cent and 76.45 per cent of their total outward shipments bound for the US. However, conversely, the share of Mexican goods in US imports in that year was just 14.98 per cent, and that of Canada’s 12.95 per cent.