India Diversifies Exports as China Surpasses US as Top Trading Partner

India is projected to exceed $850 billion in total exports for the 2025-26 financial year, according to Commerce Secretary Rajesh Agrawal. This growth comes as India recalibrates its trade strategy to mitigate the impact of 50% tariffs imposed by the United States in August 2025, which were partly punitive measures regarding India's purchase of Russian oil.

Trade data from April to December 2025 reveals a significant shift in partnerships. China has replaced the United States as India's largest overall goods trading partner, totaling $110.20 billion in transactions compared to $105.31 billion for the U.S. Exports to China surged 67.35% to $2.04 billion in December alone, driven by electronics, marine products, and agricultural goods. This pivot follows a warming of bilateral ties between Prime Minister Narendra Modi and President Xi Jinping, including a September 2025 agreement to enhance cooperation.

While total merchandise exports grew 2.44% to $330 billion during the same period, a surge in imports—driven largely by a 40-50% jump in oil shipments—widened the trade deficit to $25.04 billion in December. To sustain growth, the Government of India is pursuing free trade agreements with the European Union and resuming negotiations with Canada. However, diplomatic friction remains with the U.S.; while India claims to be finalizing a trade deal, U.S. Commerce Secretary Howard Lutnick asserted a deal failed because Prime Minister Modi did not call President Donald Trump.