India’s exports to China soared in December while shipments to the U.S. declined as President Donald Trump’s steep tariffs prompt New Delhi to focus on alternative markets.
Exports to China surged 67% in December to $2 billion, in contrast to goods shipped to the U.S. — New Delhi’s biggest export market — that dropped 1.8% to $6.8 billion, according to government data released late Thursday.
The U.S. has slapped 50% tariffs on New Delhi, among the highest on any country and even more than on China, upending both the trade and diplomatic relations between the two countries.
During the first nine months of the fiscal year ending March 2026, India’s exports to mainland China have risen nearly 37%, while shipments to Hong Kong have jumped more than 25%.
Earlier this week, India’s Foreign Secretary Vikram Misri met Vice Minister of the International Department of the Communist Party of China Sun Haiyan in New Delhi to discuss the “progress made in stabilizing and rebuilding bilateral ties with priority on business and people-centric engagements.”
Relations between the two countries have been thawing since Prime Minister Narendra Modi and Chinese President Xi Jinping met at the Shanghai Cooperation Organization summit in September sharing a vision of being partners not rivals.
China has emerged as India’s largest goods trading partner, doing business worth $110.20 billion between April and December 2025, upstaging the U.S. at $105.31 billion, data from the India’s commerce ministry shows.
But India’s widening trade deficit with Beijing and border disputes have been a bone of contention between the two. The country’s trade balance with China is in sharp contrast with the U.S.
New Delhi runs a trade surplus with Washington, while it’s trade deficit with Beijing has been soaring. During April to December, India’s trade surplus with the U.S. was more than $26 billion, deficit with China stood at $81.7 billion.
In fiscal year 2025, India traded goods worth $131.84 billion with Washington and $127.71 billion with its Asian neighbor, not accounting for Hong Kong.
Deficit, tariffs and diversification
India’s merchandise trade deficit for December rose 21.4% year on year to $25 billion. The country’s merchandise exports in December rose 1.9% while imports grew 8.8% compared to a year ago.
However, the deficit was lower than a Reuters poll estimate of $27 billion.
Exports had registered a surprise growth of 19.4% in November, with shipments to the U.S. rising 22.6% amid hopes a possible deal.
India’s trade secretary Rajesh Agrawal on Thursday said that New Delhi was “very near” to finalizing a deal with Washington but refused to put a deadline to it, according to domestic media reports.
Despite the two sides being engaged in negotiations for months, a deal has been elusive. U.S. Commerce Secretary Howard Lutnick on a podcast last week said the India–U.S. trade deal fell through because Prime Minister Modi did not call President Trump.
“I set the deal up. But Modi had to call President Trump. They were uncomfortable with it, so Modi didn’t call,” Lutnick said.
The Indian side has called these comments “inaccurate.”
U.S. Ambassador to India, Sergio Gor, who took charge last week, has said that finalizing a trade deal with a large nation like India is “not an easy task to get this across the finish line, but we are determined to get there.”
India, which has ambitions to become an export powerhouse, has been looking to diversify its exports to make up for the impact of U.S. tariffs.
Agrawal said that the country was close to signing a much-awaited trade deal with the European Union this month, according to a report by Reuters.
Since U.S. tariffs were announced, India has entered into trade pacts with the UK, Oman as well with New Zealand which will be signed in the first half of 2026.
India has a “well-diversified and resilient export footprint,” said S. C. Ralhan, president, Federation of Indian Export Organisations, highlighting UAE, China, Netherlands, UK and Germany as India’s top export destinations in addition to the U.S.
“This diversification is particularly critical at a time when global trade routes are being reshaped due to geo-political conflicts, sanctions, shipping disruptions and strategic realignments, he said in a statement.
Source: CNBC