Examine how global trade policy shifts (e.g., US tariff changes) have influenced India's merchandise trade trends in recent years.

Global trade is moving from rule-based liberalisation towards tariff-led protectionism, with US tariff revisions the sharpest trigger. NITI Aayog's Trade Watch Quarterly, whose third edition devoted its thematic study to evolving US trade policy and India's export landscape [1], shows the impact on India as mixed — creating both relative advantage and structural vulnerability.

Channels through which policy shifts transmit

• Tariff differentials: US duty changes on competing exporters left India with a relative tariff advantage in several lines, identified as a strategic window to expand in the American market [1].
• Product reallocation: high-value segments gained; aircraft, spacecraft and parts entered India's top ten export categories for the first time, growing over 200% year-on-year [1].
• Value-chain exposure: sectors dependent on imported raw material and thin processing margins absorb external shocks fastest.

Observed merchandise trade trends

• Growth has been modest and import-led. In Q3 FY25 exports rose 3% to $108.7 billion against imports of $187.5 billion (up 6.5%) [1]; by Q3 FY2025-26 exports grew just 1.6% while imports grew 7.9%, widening the goods deficit [2].
• Structural erosion persists: India's share in global gems and jewellery trade fell from 12% to 7.8% (excluding raw gold), with exports of $26.7 billion against a $207.3 billion diamond and precious-metal segment — India processes, but captures little value [2].

The offsetting cushion

• Services and remittances contain the damage. A $61.0 billion merchandise deficit was offset by $40.0 billion net services receipts and $28.1 billion remittances, holding the current account deficit at 1.0% of GDP [3].

Thus, external policy shifts have not derailed India's trade, but they have exposed a narrow export basket and weak value capture. Diversifying markets and partners, deepening domestic value addition through sector strategies such as the electronics push flagged by NITI Aayog [4], and converting these diagnoses into Foreign Trade Policy action can turn tariff turbulence into an opportunity for resilient, high-value export growth.