India's Manufacturing Sector Struggles with US Tariffs Amid Global Market Diversification Efforts

India's manufacturing sector is facing mounting pressure from US tariffs as we head into the final months of 2025. The HSBC India Manufacturing Purchasing Managers Index fell to 56.6 in November, marking a nine-month low and representing a sharp decline from October's 59.2 reading. While this still indicates expansion in the manufacturing economy, the trajectory tells a troubling story for Indian exporters. The root cause is clear: President Trump's 50 percent tariff on Indian goods has devastated export orders. New export orders fell to a 13-month low in November, with manufacturers reporting weakened demand from international clients. This comes after India's total exports to the United States plummeted 28.5 percent between May and October 2025, a staggering contraction that reflects the real economic consequences of these tariffs. The impact extends beyond export numbers. Manufacturing output growth has decelerated to its weakest pace since February, and business confidence among producers has hit a three-and-a-half-year low. Companies are absorbing cost pressures themselves rather than passing them to customers, squeezing profit margins across sectors. Employment growth has also softened, with manufacturers hiring only for essential functions as they navigate this uncertain environment. However, India's government is taking action. According to reports from early December, the Modi administration is pursuing aggressive market diversification through free trade agreements. Negotiations for a landmark India-EU trade deal are expected to conclude by the end of December 2025, potentially opening massive new opportunities. India is also advancing trade talks with Oman, Canada, New Zealand, and Chile, among others. Additionally, the government quietly began rolling back quality control orders on intermediate inputs like minerals and polymers that had restricted imports, recognizing these barriers harm small producers in textiles and other sectors struggling under tariff pressure. India's industrial production also weakened, rising just 0.4 percent in October compared to four percent in September. While festival-related disruptions played a role, economists acknowledge early tariff headwinds are transmitting through supply chains. The silver lining is that India's manufacturing sector maintains underlying strength. The PMI remains well above its long-term average of 54.2, and the economy posted robust 8.2 percent GDP growth recently. Moreover, strong business from Africa, Asia, the Middle East, and Europe suggests Indian manufacturers are successfully developing alternative markets beyond the United States. Listeners, as this trade tension evolves, the India-US bilateral agreement expected by late 2025 will be critical. A favorable framework could ease tariff burdens and revive export momentum. Thank you for tuning in to India Tariff News and Tracker. Don't forget to subscribe for the latest updates on how these trade dynamics continue to resh This content was created in partnership and with the help of Artificial Intelligence AI.