India-US air exports collapse after 50% tariffs, trade shifts to Europe and Asia

Dubai: When the US raised tariffs on Indian goods to 50% in late August, exporters rushed to beat the deadline. Cargo planes filled up, shipments soared, and India-to-US volumes spiked by 28% in a single week.

Then, almost overnight, the flow dried up.

According to WorldACD Market Data, air exports from India to the US plunged by 12% in the first week after the new duty took effect, and fell another 14% in early September. The sharp reversal highlights how quickly trade barriers can disrupt supply chains and shift market patterns worldwide.

The first tariff hike, a 25% duty imposed on August 7, had already unsettled exporters. But it was Washington’s decision to double that penalty to 50% from August 27—citing India’s continued purchase of Russian oil—that triggered panic among shippers.

Freight forwarders report that exporters scrambled to push consignments out of India before the deadline. Volumes to the US jumped by more than a third compared with the same week last year. Once the duty hit, orders slowed to a trickle.

Spot freight rates tell the same story. Prices for shipping Indian goods to the US dropped below $4 per kilo in early September, the lowest in months and 22% lower than last year, reflecting the sudden drop in demand.

While the US corridor shrank, Indian exports to Europe kept rising. By early September, tonnages were up 8% year-on-year, showing that exporters were already looking westward for relief.

Sri Lanka also saw gains: its air cargo to the US climbed 13% in early September compared with last year. Meanwhile, Asia-Pacific exporters such as Vietnam, Taiwan, and Thailand increased their shipments to America by around 40% year-on-year over the past ten weeks, filling the gap left by China, Hong Kong, and now India.

The broader trend is clear: when tariffs or policy changes make one source too costly, buyers pivot fast to alternatives.

For India, the stakes are high. Around $48.2 billion worth of exports to the US are now subject to the 50% tariff, covering industries from textiles and jewellery to chemicals and footwear.

The government’s Chief Economic Adviser has warned the duties could shave 0.5 to 0.6 percentage points off GDP growth this year. That is no small setback for an economy that has positioned itself as a major alternative to China in global supply chains.

Small and medium-sized exporters, many in labour-intensive sectors, are expected to be hardest hit. Cancellations, reduced margins, and idle capacity could ripple through industrial clusters across states such as Gujarat, Tamil Nadu, and Maharashtra.

India’s loss may become Asia’s gain. Vietnam and Bangladesh, already beneficiaries of US firms diversifying from China, stand to attract even more orders. Freight capacity is already shifting away from China-US routes toward Europe and other Asian markets, according to WorldACD data.

At the same time, the US has ended duty-free “de minimis” exemptions for commercial shipments from all countries. That raises costs for smaller exporters worldwide and adds another layer of uncertainty to trade flows.

The immediate question is how India will respond. Finance Minister Nirmala Sitharaman has hinted at relief measures for exporters and a close watch on the rupee, which could soften the blow by making shipments cheaper abroad.

Diplomatically, the tariffs remain tied to India’s oil purchases from Russia. Any change in that policy—or a negotiated settlement—could ease pressure. But as long as the 50% duty remains, exporters face tough choices: absorb costs, find new buyers, or risk losing global market share for good.

Air cargo statistics often feel abstract, but the story behind the numbers is stark. Factories in India’s export hubs are staring at falling orders. US importers are scrambling for cheaper alternatives. And new trade corridors are being carved out across Asia and Europe.

The India-US tariff clash shows how a single policy shift can ripple across continents, alter supply chains, and reshape who benefits in global trade.