Daybreak - Can Trump's tariffs push India to rewire its global trade?

Episode Date: August 28, 2025

On August 27, 2025, U.S. tariffs on Indian exports doubled to 50%, slamming nearly $60 billion worth of goods from textiles and gems to furniture and leather. Industry groups warn shipments to America could plunge by more than 40%, with job losses running into the hundreds of thousands. But behind the headlines lies a deeper story.For decades, Indian exporters leaned on the predictability of the U.S. market. But it was a comfort trap that left them dangerously exposed. Now, that comfort has snapped. Factories are idling, the rupee is weakening, and growth forecasts are being cut. And yet, this shock could also be the push India needs to diversify and build resilience into its export ecosystem. Can a crisis this severe become the catalyst for transformation?Tune in.More on Trump's tariffs:1. US consumers may not notice the ‘Made in India’ tag, but after Trump's tariffs, their wallets will2. Biden said 'please' till 2024. Trump's saying 'penalty' in 2025Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

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All the details will be in the show notes of this episode. Washington says that this whole fiasco with the tariffs is all about India's oil trade with Russia. But in reality, it is something bigger. A reminder of just how dependent India has become on one market and how fragile that comfort can be. On the 27th of August, Donald Trump's punishing 50% tariff on a wide array of Indian exports kicked in. And the blow is pretty targeted too.

Labor-heavy industries, textiles, gems, jewelry, leather, furniture are all staring at export collapses of up to 70%. Overall shipments to the US are expected to fall by more than 40%. Hundreds of thousands of jobs are at stake. Even India's GDP growth could take a hit of up to half a percentage point next year. Today, nearly one in five Indian exports goes straight to the US, a share that has grown steadily over the last decade or so. For exporters, this sort of reliability bred comfort and comfort bread complacency.

Why risk chasing buyers in Latin America or Africa or East Asia when the American market felt bottomless? The tariffs are stripping away this illusion. Factories are idling, orders are being cancelled and the rupee has weakened for five straight sessions. But beneath the crisis lies something deeper. A chance, perhaps overdue for India to rethink its export story. Because here is a paradox. While exports are hurting, India has a cushion that most economies lack. Nearly 80% of our GDP is powered not by foreign buyers but by domestic demand.

And that means that Delhi can absorb some of the pain while it pushes for a bigger shift, towards new trade partners, high-tech exports and a more balanced global strategy. So the question that we will explore today is, can these tariffs become the catalyst for a much-needed transformation of India's exports ecosystem, something that the country has long put off. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nick Dha Sharma, and I don't chase the news cycle. Instead, every day of the week, my colleague, Rahal Philipos and I will come to you with one business story

that is worth understanding and worth your time. Today is Friday, the 29th of August. The numbers actually tell the story. Two-thirds of India's exports to the US worth anywhere between $50 to $60 billion, depending on who you ask, are now under the new 50% tariff. And the sectors hit hardest are the ones that employ the most people. Textiles alone ship more than $10 billion worth of goods to America. The Apparel Export Promotion Council says that this new duty will make Indian clothing about 30% more expensive than products. from Bangladesh or Vietnam.

And some lines are unviable overnight because of the tariff. It is no accident. By leaving pharmaceuticals and electronics untouched for now, Trump and Coe have aimed squarely at India's labor-intensive backbone. By squeezing these jobs, the U.S. is ramping up pressure not just on the economy, but on India's politics too. And to soften the immediate blow, exporters are asking the government to help them connect with larger domestic buyers and other government departments.

The center in turn is looking at temporary relief packages that could include cheaper credit. But the real challenge is that no one knows how long the staff phase will last or how demand itself will be affected. So credit support alone cannot fix everything. In fact, textile and apparel makers in Tirpur, Noida and Surat have already stopped production because of rising costs that are making. them less competitive and new orders are uncertain. But the deeper issue here is not just the tariff itself, like I said before. It is the comfort trap. For decades, Indian exporters

enjoyed the predictability of the American market. Demand was steady, trade channels were smooth, margins were good enough, and that made diversification unnecessary. Even unattractive, you could say. By 2024, the U.S. became India's single largest export. market, accounting for nearly 20% of its total exported goods. This is up from about 15% in 2017 and just 11% back in 2010 right after the financial crisis. Now, compare this with China. Over the same period, Beijing did exactly the opposite, cutting its reliance on the US from about 20% of exports down to 14% by deliberately spreading out its trade.

India, meanwhile, did exactly the opposite. It kept leaning harder on the American market, and that is exactly the leverage that Trump is using right now, without hesitation, even if it risks undoing three decades of careful relationship building between Delhi and Washington. Now, as you may have figured, this inertia left India's trade dangerously unbalanced.

External Affairs Minister S. J. Shankar even admitted recently that the lesson here is simple. India must never again rely on a single supply chain or a single market. Now, that comfort has snapped. And the timing could not be worse. The Indian rupee has already weakened for five consecutive sessions since the tariffs took effect. Growth forecasts are being trimmed and though government officials insist that there is no cause for panic, the panic is real. So what is India doing in response?

To find out, stay tuned. It's not all doom and gloom. Let us not forget that India does have one major advantage that many export-driven economies don't. It's own people. Like I mentioned earlier, exports make up about only 20% of India's GDP. Out of this, 2% is the US. And the other 80% comes from domestic demand. This question means that New Delhi can weather the storm while it reshapes its trade policy. Meanwhile, India isn't left sulking either. It is fighting. writing back with policy, with diplomacy, and with a brand new export game plan worth 25,000 crore rupees. So first, let's dive into India's stand. The Ministry of External Affairs did not mince its words. It called the U.S. decision unfair, unjustified and unreasonable. Officials pointed out the obvious irony. Washington and EU continue to import Russian goods themselves while punishing India for doing the same thing. Spokesperson, Randhir Jaiswal, went further. saying India would take all necessary actions to protect its national interests.

That is diplomatic code for we are not backing down. And on the home front, Delhi rolled out damage control right away. Exporters in sectors like textile and gems suddenly risked losing competitiveness overnight. So the government announced GST tweaks and targeted tax relief. Small exporters were promised access to liquidity, special credit lines, working capital support, and emergency loan guarantees. The goal was simple. Stop panic, avoid layoffs and keep things moving.

It is a temporary lifeline, yes, but it is also buying time. Time for exporters to adjust and for the government to push its bigger plan. Because the real battle is not just economic. It is geopolitical. Prime Minister Narendram Modi has actually been busy on the road. He just wrapped up a visit to Japan where he talked trade, tech and a massive potential Japanese investment package. Energy security, semiconductors, critical minerals, Tokyo and Delhi are clearly signaling that they want to deepen ties. And that matters, because Japan is both a court

partner and a counterweight to America's unpredictability. This week, Prime Minister Modi is going to be heading to China for his first visit in seven years to meet the Chinese Premier Xi Jinping. He'll be attending the Shanghai Cooperation Organization Summit and test whether Delhi and Beijing can actually thaw their frosty ties, at least on the trade front. Direct flights are resuming, there is talks of visas easing, and both sides are quietly acknowledging that American pressure is pushing them towards pragmatic engagement. But here is the big domestic play, the Export Promotion Mission. A six-year, 25,000-craw-rupy package designed to rewire India's export ecosystem.

It is split into two flagship schemes. Niriath Prothsahan, more than 10,000 crore rupees worth to support exporters with credit, alternative finance and even export credit cards for small digital sellers. And Niriath Disha, over 14,000 crore rupees worth to help with compliance, branding campaigns, overseas warehousing and training programs that plug Indian enterprises into global supply chains. Think of it as India is saying, if one door closes, we will build 10 new ones. The question of over-dependence on the American market still remains. So, instead of retaliating against the US, New Delhi is pushing its exporters towards new regions.

40 countries are on the outreach list, from Japan and Germany to Latin America and the Middle East. Textiles alone have a massive potential. The global market is worth over $800 billion a year, but India's share is just 5 to 6%. Even pushing this up by a few points could offset much of the year. US laws. Free trade agreements are central here too. Recent deals with the UAE and Australia already have boosted exports by 13 to 15% and now talks with the UK, EU and even Russia are in play. Of course, none of this is going to be painless. The tariff shock could still shave off nearly half a percentage point of India's GDP

in the next fiscal year. Workers and textiles and gems may face layoffs and politically India must walk a tightrope. Standing form of on its energy security while keeping the US partnership intact. But there is also opportunity. By being forced out of its comfort zone, India is accelerating reforms that it had long postponed. It is finally investing in the hard work of diversification, technological upgradeation and export infrastructure.

So here is very land. The US tariffs are not just a test of India's economy, they are a test of its resolve. The question isn't whether India can survive this blow. It is whether it can use it to transform itself. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings.

A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. To subscribe, head to the Ken.com and click on the red subscribe button on top of of the Ken website. Today's episode was hosted by Snigda Sharma and edited by Rajiv CN.