The Great Trade Pivot: India Shifts East as US Tariffs Bite
The Great Trade Pivot: India Shifts East as US Tariffs Bite
India’s economic landscape is undergoing a seismic realignment. As of January 17, 2026, the “Trump Tariffs” have officially reshaped global trade routes, pushing New Delhi into a surprising embrace with Beijing while fast-tracking a historic “mega-deal” with Europe.
Here is the breakdown of the trending shifts in India’s trade strategy.
1. The Numbers: China Reclaims the Top Spot
For the first time in years, China has overtaken the United States as India’s largest merchandise trading partner. Driven by a massive surge in December exports and a cooling relationship with Washington, the trade data for the April–December 2025 period reveals a significant flip:
| Trading Partner | Total Trade (Apr-Dec 2025) | Export Trend (Dec 2025) |
| China | $110.20 Billion | +67% Surge |
| United States | $105.31 Billion | -1.8% Decline |
The Reality Check: While exports to China are soaring, the trade deficit remains a thorn in India’s side, hitting a record $116.12 billion for the 2025 calendar year.1 India is selling more to China, but it is buying even more in return.
2. Sectoral Winners and Losers
The 50% tariffs imposed by the US have acted as a “surgical strike” on specific Indian industries, while others have found a way to thrive under the radar.2
The Hit List (Traditional Sectors)
-
Textiles & Garments: Facing an annual decline of 10.1%.3
-
Gems & Jewelry: Growth has ground to a near-halt at just 0.4%.
-
Marine Products: Shrimp exports to the US are struggling, leading to a 15–20% price hike for American consumers.
The “Tariff-Proof” Heroes
-
Electronics & Smartphones: A massive 50.5% growth. These sectors remain largely exempt from the high US tariffs, allowing India to maintain its momentum as a global tech manufacturing hub.4
-
Pharmaceuticals: Sustained growth due to critical supply chain exemptions.
3. The “Failed Call” Diplomacy
A cloud of political drama hangs over India-US relations. US Commerce Secretary Howard Lutnick recently claimed a major trade deal fell through because Prime Minister Modi “did not call President Trump.”5
While Indian officials have dismissed these claims as “inaccurate,” the friction is palpable. However, the newly appointed US Ambassador, Sergio Gor, struck a more conciliatory tone this week, calling the partnership “consequential” and suggesting that “real friends can disagree.”6
4. Looking West: The “Mother of All Trade Deals”
With the US relationship in a state of “transactional diplomacy,” India is pivoting toward the European Union.7
Commerce Minister Piyush Goyal has dubbed the upcoming India-EU Free Trade Agreement (FTA) the “mother of all trade deals.” * Deadline:8 Negotiators are racing to finalize the pact by January 26, 2026 (India’s Republic Day).
-
The Goal: To provide Indian exporters of textiles and leather the market access they are losing in the US.9
-
The Investment: Similar to the EFTA deal, India is eyeing massive investment commitments (potentially exceeding $100 billion) in exchange for lowered tariffs on European cars and spirits.
Conclusion: A Strategy of Resilience
India is no longer “waiting” for Washington. By diversifying into Latin America, Africa, and the EU, and thawing ties with China, New Delhi is attempting to build a “shock-proof” economy. The success of this pivot will depend on whether the EU deal can truly offset the losses from the 50% US tariff wall.
The imposition of 50% US tariffs has created a “tale of two sectors” in the Indian stock market. While the Textile sector is currently in a “distressed” valuation phase, the Electronics sector is seeing a fundamental boom that isn’t yet fully reflected in share prices due to broader market volatility.
Here is an analysis of how these trends are impacting leading exporters as of January 17, 2026.
1. Textile Sector: The “Deal or Bust” Trap
Textile stocks have become highly sensitive to “Trump-Tariff” headlines. The sector is currently trading at a significant discount as investors weigh the 50% tariff reality against the hope of a 14% “détente” deal.
| Stock Name | Stock Impact (Jan 2026) | Market Sentiment |
| Welspun Living | -2.3% (Jan 8) | Distressed: Net profits plunged 93.5% in Q2 due to tariffs; investors are waiting for the EU-FTA to recover margins. |
| Gokaldas Exports | -13% (Jan 8) | High Volatility: With 70%+ US exposure, this stock reacts violently to tariff threats. Analysts see a “Phoenix Moment” if the US deal closes. |
| KPR Mill | -4% (Jan 8) | Resilient but Cautious: Vertical integration helps, but price competition from Bangladesh is squeezing their US margins. |
-
The “500% Threat”: A recent threat of 500% tariffs (as of Jan 10) caused a sector-wide sell-off, showing that investors are currently more afraid of policy shocks than they are excited by the potential 67% export surge to China.
-
The Bottom Line: For textiles, the stock price is no longer driven by production, but by Trade Diplomacy.
2. Electronics Sector: Volume Boom vs. Margin Pressure
The electronics sector is the “star child” of the 2025-2026 export data, with growth exceeding 50%. However, surprisingly, leading stock prices have recently hit 18-month lows.
| Stock Name | Stock Trend (Jan 2026) | Driving Factors |
| Dixon Technologies | -26.7% (52-week change) | The Paradox: Despite being a manufacturing powerhouse, high memory chip costs and general US-market fears have dragged the stock to ~₹11,100. |
| Amber Enterprises | +1.4% (Jan 16) | The Outlier: Growing domestic demand for ACs and components is offsetting some of the global export anxiety. |
| Kaynes Tech | Stable | Benefit from the “Make in India” semiconductor and component approvals granted in early Jan 2026. |
-
Why the disconnect? While export volumes are up, the cost of components (imported from China/Taiwan) has risen. Investors are worried that if India leans too hard on China to replace US trade, the “input costs” will eat the profits from the 50.5% export growth.
3. Investor Outlook: The “Diversification Premium”
The market is beginning to reward companies that are least dependent on the US.
-
China-Pivot Winners: Companies that have successfully diverted shipments to Beijing and Hong Kong (which saw a 25% jump) are seeing better “buy” ratings from brokerages like Kotak and Nomura.
-
The EU Catalyst: All eyes are on January 26, 2026. If the India-EU Free Trade Agreement is signed as expected, we could see a massive “short cover” rally in textile and leather stocks as they bypass the US tariff wall.