$3.17 Billion Blow: Why Gujarat’s Exports to the US Plunged 17.4% This Financial Year

A brutal mix of steep American tariffs, soaring input costs, and global shipping disruptions has wiped out $3.17 billion worth of Gujarat’s exports to the United States. Official government data reveals that total outward shipments from the state to the US plummeted by 17.4% in FY26, dropping to $15.06 billion from $18.23 billion in the previous fiscal year.

Manufacturing hubs across Rajkot, Morbi, and the wider Saurashtra belt bore the brunt of the downturn, with traditional export strongholds—including ceramics, petroleum products, gems, jewellery, and engineering goods—suffering severe contractions as American buyers paused orders amid pricing uncertainty.

Punitive Tariffs and Shipping Squeezes Squeeze Manufacturers

The root of the trade contraction traces back to aggressive US protectionist measures. Washington slapped an initial 25% reciprocal tariff on most Indian goods, followed by a second 25% duty levy in August last year. The cumulative 50% tariff penalty severely eroded the price competitiveness of Gujarati manufacturers against competing global suppliers.

Compounding the tariff barrier was a sharp rise in raw material prices and logistical bottlenecks. A fresh wave of disruptions around the Strait of Hormuz in March triggered severe supply shocks for chemical manufacturers, pushing up the cost of vital inputs like sulphur, while a stronger US dollar and elevated ocean freight rates further squeezed operating margins.

"We faced a double whammy," said Paresh Patel, former president of the Rajkot Engineering Association. "High US tariffs combined with ongoing geopolitical instability to hit order volumes hard."

To survive the demand slump, many industrial units were forced to trim production lines, while others unloaded export inventory into the domestic Indian market at steep discounts.

"Some exporters diverted their stocks to local markets, while others had no option but to cut factory output," noted Haresh Bopaliya, a leading ceramic manufacturer based in Morbi.

Pharma Holds Firm as Trade Framework Sparks Recovery Hopes

Not all sectors felt the sting equally. Gujarat’s massive pharmaceutical sector remained largely insulated, thanks to generic medicines being granted an exemption from the higher US tariff brackets. Strong demand for cost-effective Indian formulations ensured steady shipments to American healthcare markets throughout the crisis. Electronic components and agrochemicals also managed to buck the trend and post positive growth.

Industry leaders are now looking ahead with cautious optimism following the interim India-US trade framework announced on February 6, 2026. Under the deal, Washington agreed to roll back reciprocal tariffs on designated Indian products to a more manageable 18%.

Mihir Madeka, Director at Rolex Rings, believes the worst of the export shock has passed. "Market conditions in the US are beginning to stabilise," Madeka said. "If geopolitical tensions do not escalate further, we expect a strong rebound in shipments during the current financial year."

Exporters across the state are now tracking negotiations for the broader India-US Bilateral Trade Agreement, hoping long-term policy certainty will restore Gujarat's export momentum.