Why India's US Exports Slumped 8% Amid Elevated Tariffs

Paul Allen

16 Nov 2025 • 6 min read

Most exporters assume tariffs are a background cost, but Bank of America just confirmed India's exports to the U.S. fell 8% year-over-year in September 2025 amid elevated tariffs. The decline highlights a structural limit on export growth linked directly to tariff dynamics.

India's exports dropped sharply despite global supply chain normalization, signaling the real issue isn't production capacity—it's the unresolved tariff pressure. But the actual leverage challenge is how tariffs recalibrate the cross-border trade flow, effectively shifting cost constraints from producers to access mechanisms.

This shift means exporters can't simply scale volume to offset tariffs—the elevated duties act as a dynamic choke point, forcing companies and policymakers to rethink trade system designs. Operators building global supply chains should note: ignoring tariff-triggered constraints leads to growth stalls regardless of production efficiency.

Tariffs Reshape Export Economics by Reallocating Cost Burdens

The 8% slump in Indian exports to the U.S., reported by Bank of America, is not just a reaction to higher costs. Tariffs impose a new constraint that restructures the economic model of exporting.

Instead of a linear cost increase absorbed at the margin, tariffs create a threshold effect. Exporters below a competitiveness cutoff lose market access altogether, while only the most cost-efficient suppliers capture remaining volume. This bifurcation shifts the constraint from supply-side capacity to tariff-filtered demand access.

For example, Indian textile exporters face tariffs up to 15%—a gap challenging to pass on in price-sensitive markets. This tariff barrier eliminates orders that would otherwise flow freely, causing an outsized drop in shipped volume compared to a simple price increase.

The Constraint Shift from Production to Market Access Requires Strategic Redesign

Exporters traditionally leverage scale and operational efficiency to lower per-unit costs. With tariffs, the effective constraint is no longer manufacturing but market gatekeeping.

This requires repositioning from purely production leverage to access leverage—innovation in navigating tariff regimes, supply chain origin diversification, or tariff mitigation strategies like Free Trade Agreements (FTAs).

India's ongoing trade talks and tariff adjustments present an opportunity to unlock this 'access leverage.' For instance, strategic FTAs can lower tariffs and expand export volume by removing the cost choke point.

This mechanism mirrors lessons from why U.S. trade talks suspension revealed negotiation leverage limits—without addressing tariff constraints, volume gains plateau.

Why Simply Increasing Production Won't Break the Export Slump

Many Indian exporters might respond by ramping production or seeking scale efficiency. However, with tariffs acting as a hard boundary, increased output does not translate into increased U.S. market share.

This is a classic trap where increasing supply meets capped demand — a production leverage fallacy when access constraints dominate. The system's bottleneck moves from internal capacity to external regulatory cost hurdles.

Alternative paths like targeting tariff-exempt product categories or leveraging digital exports could realign leverage. This reflects how companies reallocate efforts to bypass bottlenecks rather than doubling down on constrained nodes.

Elevated Tariffs Create Durable Structural Hurdles for Indian Exporters

India's export slump amid tariffs exemplifies how trade policy creates long-term constraint shifts. Importantly, tariffs are not transient costs but embedded system levers that lock in competitive disadvantage unless countered strategically.

This makes tariff management a form of system design for export growth—either through negotiation, substitution, or market diversification. India's current drop mirrors broader patterns seen in other high-tariff contexts, emphasizing that tariff navigation is a core strategic capability, not just a cost to bear.

Investors and operators must track tariff shifts as real constraint signals, similar to how labor market slack or capital flow restrictions predict broader scaling limits, as discussed in labor market constraint shifts or early funding constraint realignments.

Navigating elevated tariffs and market access challenges requires smart sales intelligence and targeted outreach. For businesses looking to realign strategies and expand export opportunities, Apollo offers robust B2B prospecting and contact data that can help identify and engage the most promising buyers in constrained markets. This strategic approach to demand access complements the insights on tariff-driven export limits discussed here. Learn more about Apollo →

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Frequently Asked Questions

Why did India's exports to the U.S. decline 8% in 2025?

India's exports to the U.S. fell 8% year-over-year amid elevated tariffs that acted as a dynamic choke point, shifting cost constraints from producers to market access and limiting export growth despite global supply chain normalization.

How do tariffs affect the economics of exporting?

Tariffs create a threshold effect where exporters below a competitiveness cutoff lose market access entirely, while only the most efficient suppliers maintain volume. This shifts constraints from supply capacity to tariff-filtered demand access, restructuring export economics.

Why can't Indian exporters overcome tariffs simply by increasing production?

Because tariffs cap market access, increasing production doesn't increase U.S. market share. The supply can meet capped demand, creating a bottleneck that shifts from capacity to regulatory cost hurdles, making scale alone ineffective.

Exporters can innovate by navigating tariff regimes better, diversifying supply chain origins, or leveraging Free Trade Agreements (FTAs) to reduce tariffs. For example, FTAs can lower duty costs and expand export volume by removing tariff choke points.

How high are the tariffs faced by some Indian exporters, such as textile exporters?

Indian textile exporters face tariffs up to 15%, a significant barrier that is difficult to pass on in price-sensitive markets, resulting in eliminated orders and a disproportionate drop in export volumes compared to simple price increases.

What long-term impact do elevated tariffs have on Indian exporters?

Elevated tariffs create durable structural hurdles that lock in competitive disadvantages unless addressed via negotiation, substitution, or market diversification. Tariff management becomes a core strategic capability essential for export growth.

How can businesses realign export strategies to address tariff constraints?

By targeting tariff-exempt product categories or leveraging digital exports, companies can bypass tariff bottlenecks. Additionally, using smart sales intelligence and targeted outreach tools, like Apollo, helps engage promising buyers in constrained markets.

Why is tariff management considered a form of system design for export growth?

Because tariffs are embedded levers that control market access rather than transient costs, managing them requires strategic redesign of the trade system through negotiation, origin diversification, or FTAs to unlock growth rather than just reacting to costs.