How the 2025 U.S. Reciprocal Tariffs Are Reshaping Global Supply Chains — What Indian Exporters Should Know

In 2025, a new chapter in global trade policy unfolded as the United States significantly revamped its tariff regime under a policy of reciprocal tariffs. Designed to rebalance trade relationships and penalize countries seen as engaging in unfair trade practices or geopolitical posturing, this tariff escalation has sent shockwaves through global supply chains and hit major trading partners — including India. For Indian exporters, especially in key labour-intensive sectors like textiles, gems and jewellery, shrimp and other goods, these developments are rewriting the economics of trade with the U.S., forcing strategic realignment and urgent adaptation.

What Are the 2025 U.S. Reciprocal Tariffs?

The U.S. government introduced a sweeping tariff schedule on foreign imports in 2025 under the banner of “reciprocity” — meaning that tariff rates on goods would reflect perceived imbalances in market access or trade practices. For India, this culminated in an effective tariff rate on many goods of up to 50%, far above the traditional levies seen in earlier years. These tariffs took effect in phases, with the most impactful layers applied from August and September 2025.

This tariff escalation, driven in part by political pressures around trade deficits and geopolitical tensions (including India’s continued purchase of discounted Russian crude oil), has sharply increased the cost of Indian products entering the U.S. market and disrupted long-established supply chains.

Immediate Impact on Indian Exports and Supply Chains

The U.S. is historically one of India’s largest export destinations, accounting for roughly 18–20% of the country’s merchandise exports. When tariffs doubled or tripled for several key product categories, the immediate consequence was a rapid shift in trade economics.
According to recent industry and government estimates:

• India’s overall merchandise exports to the U.S. could shrink sharply in FY 2025-26 — projected to fall by roughly 40–45% compared to the previous year’s nearly $87 billion.
• In sectors like textiles and apparel, the imposition of a total ~50% tariff (combining standard duty with additional levies) made Indian products significantly less price-competitive compared to rivals such as Vietnam and Bangladesh.
• The gems and jewellery sector, which historically relies on the U.S. market for about 30% of its exports, faced similarly heavy tariff burdens, threatening margins and jobs.
• Marine products, particularly shrimp — another key export — saw tariffs that pushed them well above 50% in some cases, discouraging U.S. buyers and incentivizing shifts to alternative suppliers.

These changes have cascading effects on freight volumes, cargo flows, and global sourcing strategies, as U.S. buyers re-evaluate long-term contracts and supply agreements in light of sharply increased landed costs. 

Sectoral Stress Points: Who’s Hurt Most?

While the tariffs apply broadly, some Indian export sectors feel the pain more acutely due to their reliance on U.S. demand and their narrow pricing margins:

Textiles & Apparel

India’s textiles and apparel industry exported over $10 billion worth of goods to the U.S. in FY 2024-25, making it one of the most exposed sectors. With tariffs reaching nearly 60-plus percent in effective duty for certain knitted and woven categories, many Indian firms reported order cancellations, extended credit cycles, and inventory build-ups as prices soared for U.S. buyers. 
A recent survey indicated that over one-third of Indian textile exporters saw turnover cut by half following these tariff changes, with many offering steep discounts to maintain competitiveness — eroding profitability and stressing working capital. 

Gems & Jewellery

This high-value sector also faced a steep tariff hike, with duties on many products well above 50%. India’s gemstone and jewellery clusters — concentrated in cities like Surat and Mumbai — have strong historical ties with U.S. markets. These tariffs contributed to reduced orders, tightening margins, and rising operational pressure for small and medium producers.

Marine Products & Shrimp

Marine exports historically contribute significantly to coastal economies in Andhra Pradesh, Kerala and West Bengal. Shrimp exports to the U.S. were hit by effective duties of 60% or more, encouraging buyers to look instead to competitors like Ecuador that face lower barriers.

MSMEs and Supply Chain Fragmentation

Small and medium enterprises (MSMEs), which form the backbone of India’s export ecosystem, have felt disproportionate strain due to their limited capacity to absorb tariff costs or negotiate long-term contracts that protect margins. This has led to cash flow stress, slowed payments within supply chains, and potential job losses in export clusters across the country.

Macro Effects: Rupee, Foreign Investment, and Trade Balance

The tariff shock has also influenced macroeconomic factors. Recently, the Indian rupee slid to record lows against the U.S. dollar, partly due to pressures from declining exports, diminished foreign investor inflows, and ongoing trade negotiations with the U.S. lagging behind expectations.
Capital outflows have been reported as investors respond to export weakness and global monetary tightening, adding stress to India’s balance of payments and complicating supply chain financing for exporters.

How Indian Exporters Are Responding

Faced with heightened tariffs and disrupted demand from the U.S., Indian exporters are deploying several strategic responses:

1. Diversification to New Markets

Exports are being actively redirected to alternative destinations outside the U.S., including European Union countries, the UK, Middle East and emerging Asian markets, as firms seek to reduce dependence on any single geography.

2. Government Support and Fiscal Packages

In November 2025, the Indian government approved a ₹450.6 billion (~$5.1 billion) support package for exporters to help them cope with tariff burdens, liquidity stress and the costs of diversifying markets.

3. Trade Negotiations and Diplomatic Engagement

India and the U.S. have intensified bilateral trade discussions to explore tariff relief, market access improvements, and broader economic cooperation. These dialogues are ongoing, with officials from both sides seeking mutually beneficial frameworks to reduce friction.

Long-Term Outlook for Supply Chains

While the short-term impact of the 2025 U.S. reciprocal tariffs has been disruptive for Indian exporters and the broader global supply chain, there are indications that market participants are adapting. Supply chain resilience strategies — including diversification, near-shoring, and deepening trade with alternative partners — are gaining prominence. 
However, sustaining export growth will require addressing tariff barriers, strengthening logistics competitiveness, and improving access to finance for MSMEs that power India’s export clusters.