Why India’s Smartphone Exports To US Plunge 58% Despite Tariff-Free Status? GTRI Notes Scope Of Further Decline

India’s smartphone exports to its largest overseas market, the United States, have fallen sharply, dropping 58% from USD 2.29 billion in May to USD 964.8 million in August 2025, according to the Global

Trade Research Initiative (GTRI). The decline comes despite the absence of tariffs on smartphones, highlighting an alarming trend in India’s export performance.“This demands urgent investigation to uncover the real reasons driving the fall,” said GTRI Founder Ajay Srivastava, emphasizing that the sharp decline in India’s top export category to the US is counter-intuitive and concerning.Steady Month-on-Month DeclineSmartphone exports, which form India’s largest single category of shipments to the US, fell steadily over the summer months:

• May 2025: USD 2.29 billion
• June 2025: USD 2 billion
• July 2025: USD 1.52 billion
• August 2025: USD 964.8 million

For fiscal year 2025, the US remained India’s largest smartphone market, importing USD 10.6 billion, which accounted for 44% of India’s global smartphone exports (USD 24.1 billion), followed by the EU with USD 7.1 billion (29.5%).Other Export Sectors Also Face DownturnsThe GTRI report noted that the contraction extended beyond smartphones. Tariff-free products, which comprised 28.5% of India’s August exports, fell 41.9%, dropping from USD 3.37 billion in May to USD 1.96 billion in August.

• Pharmaceuticals: -13.3%, USD 745 million → USD 646.6 million
• Jewellery: -9.1%, USD 228.2 million
• Seafood: -43.8%, USD 289.7 million → USD 162.7 million
• Textiles & Garments: -9.3%, USD 943.7 million → USD 855.5 million
• Chemicals: -15.9%, USD 451.9 million

Srivastava pointed out that even goods facing high US tariffs were experiencing export declines, but the unexpected drop in tariff-free categories like smartphones and pharmaceuticals is particularly worrying.Impact of US Tariffs and Global Supply DynamicsIndia implemented phased tariffs on select products during August 2025, starting at 10% until August 6, then 25% until August 27, and 50% after August 28. Srivastava noted that September 2025 will be the first full month where the full impact of these tariffs on textiles, gems, jewellery, seafood, chemicals, and solar panels will become evident, potentially worsening the export slump.Flagship PLI Schemes at RiskThe fall in tariff-free exports poses a direct threat to India’s Production Linked Incentive (PLI) program, which has been a cornerstone of the government’s push to expand domestic manufacturing in high-value sectors. “Policymakers and industry must urgently probe the causes and act before this slide deepens,” Srivastava warned.India’s third consecutive month of declining exports to the US signals a potential disruption in trade dynamics, even for tariff-exempt products. Analysts argue that a combination of supply chain constraints, logistical bottlenecks, and global market shifts may be driving the unexpected contractions, alongside broader US trade policies.Industry stakeholders have called for an immediate review of export promotion strategies, manufacturing incentives, and market access measures to stabilize shipments and safeguard India’s position in its largest overseas market.