India set to gain with more exports and trade deals amid global tariff war: SBI Report

India’s exports to the US may decline by 3-3.5% if Washington imposes reciprocal tariffs, but this impact is expected to be neutralized through higher exports in manufacturing and services, according to a report by SBI Research. The report highlights India’s efforts in export diversification, value addition, and expansion into new markets, including trade routes connecting Europe to the US via the Middle East.

The report states, “The decline in exports from India to the US could be in the range of 3-3.5 per cent post reciprocal tariffs, if any... which again should be negated through higher export goals across both manufacturing and services fronts, as India has diversified its exports kitty, pitched value addition, exploring alternate areas and works on new routes.” The country has been signing multiple Free Trade Agreements (FTAs) to boost domestic manufacturing and exports, finalizing 13 agreements in recent years, including with the UAE, Australia, and Mauritius. Ongoing negotiations with the UK, Canada, and the European Union focus on digital trade, services, and sustainable development. The FTA with the UK alone is projected to add $15 billion to bilateral trade by 2030.

India could also see gains from the latest US tariffs on aluminium and steel. While the country is not among the top 10 suppliers of steel to the US, it ranks within the top 10 in aluminium exports. However, its share in US aluminium imports has declined from 3% in 2018 to 2.8% in 2024. India currently has a trade deficit of $13 million in aluminium and $406 million in steel, according to the report.

The report highlights that shifting global supply chains and geopolitical factors, including the US-China trade war, have influenced India’s trade strategy. The country is expanding its global trade footprint by securing new agreements, increasing value-added manufacturing, and leveraging its growing digital economy. Digital trade agreements alone could contribute an estimated $1 trillion to India’s GDP by 2025.

Amid evolving global trade policies and rising protectionism, India is working to mitigate risks through FTAs, alternative trade routes, and an emphasis on export-oriented growth. The report underscores India's ability to navigate uncertainties through its expanding economic engagements and structural shifts in trade partnerships.