India’s equity markets wobbled briefly after US President Donald Trump announced a 25% tariff on Indian goods starting Friday, along with likely penalties linked to energy imports from Russia. The move, while sharper than the 15% to 20% levies applied to some countries, triggered a correction of around ₹2 trillion in market capitalisation before stabilising. Beneath the immediate market reaction, however, lies a more structural question about India’s trade exposure and where the real risks sit.Merchandise exports have never been the backbone of India’s growth story. Goods shipments to the United States were valued at about $87 billion in 2024-25, roughly 20% of total exports and only 2% of nominal GDP. The tariff will certainly raise costs for US buyers, dampen demand and compress margins for exporters in sectors such as gems and jewellery and petroleum products. Yet this is far from catastrophic. It is neither a blockade nor a sanction. The decline in volumes will be partial rather than total, and the drag on overall growth is likely to be measured in basis points rather than percentage points. Domestic demand, still buoyed by steady GDP growth forecasts of more than 6% and easing inflation, can absorb such a hit.
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