As high-stakes trade negotiations with the United States remain stalled, India is executing a rapid and aggressive strategy to forge new international trade agreements. This push aims to open fresh markets for Indian exporters and cushion the economic impact of punishing 50% tariffs imposed by the Trump administration. The move underscores a critical shift in India's trade policy towards diversification to secure its growth trajectory.
A Strategic Pivot: Spreading Risk Beyond Washington
The immediate catalyst for this flurry of diplomatic activity was the decision by former President Donald Trump in August to hike US tariffs on India to 50%. This punitive measure, intended to pressure New Delhi over its purchases of Russian oil, threatened job losses and posed a direct challenge to India's ambition of becoming a global export and manufacturing powerhouse. Trade economist Biswajit Dhar interpreted the strategy as a direct reaction to Trump's actions, noting it has now become an imperative for India to expand its export destinations.
Ajay Srivastava of the Global Trade Research Initiative (GTRI) highlighted that 2025 has been one of the most active years for Indian trade diplomacy. The country signed or operationalized four agreements last year, including a major pact with Britain, marking its fastest deal-making pace in years. Srivastava clarified that the goal is to spread risk rather than completely pivot away from Washington.
Key Deals in the Pipeline and Their Potential Impact
India's negotiators are currently engaged in talks with several major economic blocs and nations. Active negotiations are underway with the European Union, the Eurasian Economic Union, Mexico, Chile, and the South American Mercosur trade bloc. Success in these talks would mean India has trade arrangements with almost every major global economy.
The potential benefits are substantial. The Apparel Export Promotion Council projects that the UK trade deal could double garment exports to Britain within three years. An agreement with the EU, hailed by European Commission President Ursula von der Leyen as potentially the largest of its kind globally, promises even greater gains. Although a year-end 2025 deadline was missed reportedly over steel and auto exports, Indian officials remain optimistic. High-level visits, including one by German Chancellor Friedrich Merz to meet Prime Minister Narendra Modi, are focused on intensifying trade cooperation.
Smaller agreements also play a strategic role. A December deal with Oman, despite bilateral trade of under $11 billion last fiscal year, is seen as a gateway to the broader Middle East and Africa. Similarly, a free trade agreement with New Zealand, while adding little to export growth, secured $20 billion in foreign investment and demonstrated New Delhi's willingness to compromise—a signal to other partners like the US.
Export Gains and the Irreplaceable US Market
Early signs suggest the diversification strategy is bearing fruit. India's goods exports surprised analysts with a 19% surge in November 2025, reversing an October decline. While electronics led the growth, marine product exports also posted gains. KN Raghavan of the Seafood Exporters Association of India confirmed diversification has happened, with increased exports to the EU and China.
However, exporters unanimously caution that alternative markets cannot fully replace the United States. Raghavan emphasized that a US deal remains paramount. Pankaj Chadha, Chairman of the Engineering Export Promotion Council, framed diversification as a necessity to reduce dependence on the biggest and most lucrative market, succinctly stating, It's better not to put all your eggs in one basket.
The path to a US-India trade deal remains in limbo. A sharp drop in India's Russian oil imports to 1.2 million barrels per day in December from 1.8 million in November, as per Kpler data, may be a conciliatory gesture, but it is unclear if it will satisfy Washington. For now, India continues to build a network of trade alliances, ensuring its economic ambitions are not held hostage by a single relationship.
