Aerial view of cargo ships and cargo containers in the port.
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India’s exports to China surged in December, but shipments to the U.S. fell as President Donald Trump’s hefty tariffs forced New Delhi to focus on alternative markets.
Exports to China rose 67% to $2 billion in December, compared with a 1.8% decline in goods to the United States, New Delhi’s biggest export market, to $6.8 billion, according to government figures released late Thursday.
The US imposed 50% tariffs on New Delhi, the highest of any country and even higher on China, upending both trade and diplomatic relations between the two countries.
In the first nine months of the fiscal year ending March 2026, India’s exports to mainland China rose by nearly 37%, while shipments to Hong Kong surged by more than 25%.
Earlier this week, Indian Foreign Minister Vikram Misri met with Sun Haiyan, Vice-Minister of the International Department of the Communist Party of China, in New Delhi to discuss “progress in stabilizing and restructuring bilateral relations that prioritizes business- and people-centered engagement.”
Relations between the two countries have cooled since Prime Minister Narendra Modi and Chinese President Xi Jinping met at the Shanghai Cooperation Organization summit in September and shared a vision of being partners rather than rivals.
China has emerged as India’s largest goods trading partner, with transactions worth $110.2 billion from April to December 2025, surpassing the US’s $105.31 billion, according to data from India’s Ministry of Commerce.
However, India’s widening trade deficit with China and border disputes have become points of contention between the two countries. The country’s trade balance with China is in sharp contrast to that of the United States.
While New Delhi has a trade surplus with the US government, its trade deficit with China is rapidly increasing. From April to December, India’s trade surplus with the United States was more than $26 billion, and its trade deficit with China was $81.7 billion.
In fiscal year 2025, India traded goods worth $131.84 billion with Washington and $127.71 billion with its Asian neighbors, excluding Hong Kong.
Deficits, tariffs, and diversification
India’s merchandise trade deficit in December increased by 21.4% from a year earlier to $25 billion. In December, the country’s merchandise exports increased by 1.9% from a year earlier, while imports increased by 8.8%.
However, the deficit was lower than the $27 billion forecast in a Reuters poll.
Exports rose an astonishing 19.4% in November, with shipments to the United States increasing 22.6% on hopes of a possible deal.
Indian Trade Secretary Rajesh Agrawal said on Thursday that New Delhi was “very close” to striking a deal with Washington, but declined to set a deadline, according to domestic media reports.
Although the two countries have been negotiating for months, no agreement has been reached. US Commerce Secretary Howard Lutnick said on a podcast last week that the India-US trade deal failed because Prime Minister Modi did not call President Trump.
“I set up the deal, but Mr. Modi had to call President Trump. They were uncomfortable with it, so Mr. Modi didn’t call,” Lutnick said.
India called these comments “inaccurate”.
U.S. Ambassador to India Sergio Gol, who took office last week, said striking a trade deal with a power like India is “no easy task to get across the finish line, but we are determined to get there.”
India, with ambitions to become an exporting powerhouse, is looking to diversify its exports to offset the impact of US tariffs.
Agrawal said this month that the country was close to signing a long-awaited trade deal with the European Union, Reuters reported.
Since the US tariff announcement, India has also signed trade agreements with the UK, Oman and New Zealand, which are expected to be signed in the first half of 2026.
SC Ralhan, president of the Federation of Indian Export Agencies, said India has a “well-diversified and resilient export track record” and highlighted the UAE, China, the Netherlands, the UK and Germany as India’s top export destinations, in addition to the US.
“This diversification is especially important at a time when global trade routes are being reshaped by geopolitical conflicts, sanctions, transportation disruption and strategic realignment,” he said in a statement.
