How Global Trade Conflicts in 2026 Are Impacting Indian Exporters and What DGFT Consultants Recommend

The US imposed steep reciprocal tariffs of up to 50% on Indian goods in August 2025. Between May and November 2025, exports to the US dropped by 21%, severely impacting apparel, gems and jewellery, and seafood.

India’s total exports to the US inched up only marginally to $87.31 billion in FY 2025,26 from $86.51 billion the year before. Resilient on paper. Under serious pressure underneath.

From January 2026, the EU’s Carbon Border Adjustment Mechanism (CBAM) imposes carbon costs on steel and aluminium exports entering Europe. New EU deforestation rules are also threatening agriculture-linked exports. Europe contributes over 15% of India’s total goods exports, and these new barriers are not going away.

US-China trade fell by around 30% after the tariff escalation. Chinese exporters of consumer goods, from EVs to electronics to toys, cut prices by an average of 8% to find buyers in new markets. 

Many of those markets are in Asia and the developing world, where Indian exporters also compete. Cheap Chinese goods are now undercutting Indian products in third markets.

India’s exports to the Middle East fell 57.95% in March 2026 due to the ongoing regional crisis. Imports from the region also dropped 51.6%. For Indian exporters heavily dependent on Gulf markets, this compound pressure is significant.

Not every sector is equally exposed. Here’s where the pain is sharpest:

The sectors with the most resilience? Electronics exports benefited from Apple scaling iPhone manufacturing in India. Apple now sources 20% of its global output from India, with that figure potentially climbing to 35% by 2026,27. 

Engineering goods and pharma are also holding up. But even these resilient sectors face cost pressures on imported inputs.

Here’s the practical guidance. Six experienced DGFT consultants are advising Indian exporters to act immediately.

Your export price is under pressure. Your input costs are not going down. The Advance Authorisation Scheme allows you to import raw materials duty-free, reducing your input cost base before you manufacture.

 Zero Basic Customs Duty on eligible inputs. This directly protects your margin when export pricing is squeezed by tariff-driven buyer pressure.

If you’re not already using it, start now.

Staying competitive in global markets in 2026 means producing better, faster, and cheaper. That requires technology upgrades. 

The EPCG Scheme lets you import capital goods at zero customs duty, funding technology modernisation without the 18,28% duty burden that would otherwise inflate your capex.

RoDTEP Rebate of Duties and Taxes on Exported Products refunds embedded taxes and levies in your export supply chain. Many exporters are either under-claiming or not claiming at all. With margins already squeezed, unclaimed RoDTEP is money sitting on the table.

Exporters have shown adaptability in using US-origin inputs; tariffs apply only to the value added in India, not to the full shipment value. This insight has helped sectors like jewellery, which is made with US-sourced gold, rebound.

Beyond tactical workarounds, DGFT consultants are advising exporters to seriously pursue markets beyond the US, the Middle East recovery when it stabilises, Southeast Asia, Africa, and newer FTA markets, including the UK and Oman. 

India’s recently signed FTAs create duty advantages that smart exporters are already leveraging.

Many exporters have EPCG or Advance Authorisation licences that are technically open; export obligations are partially met, annual returns are overdue, and EODC has not yet been filed. In a tighter regulatory environment, these become active liabilities.

Conduct a full DGFT licence audit. Close everything that can be closed. This also frees up bank guarantees locked at Customs.

India is navigating one of its most challenging external trade environments in decades. The focus is now on protecting existing trade and building resilience to compete globally.

DGFT policy moved fast in 2025,26. Mandatory digital-only filing. Revised export obligation timelines. 

Automatic IEC deactivation for missed annual updates. GST-DGFT data sync for RoD STEP verification. Each change had a deadline. Exporters caught unawares paid for it.

Working with expert DGFT consultants means you’re acting on policy changes before they create problems, not after they’ve already cost you.

Here’s something worth sitting with.

Global trade disruption is genuinely bad for many exporters. But it also creates opportunities for those who are positioned correctly. The prolonged US-China trade conflict has accelerated a global shift of manufacturing capacity away from China. India has emerged as a leading beneficiary of this China+1 strategy.

Manufacturers who upgrade technology through EPCG, reduce input costs through Advance Authorisation, claim every available duty benefit, and stay DGFT-compliant are building a cost and compliance advantage that their competitors, still scrambling to react, don’t have.

Trade disruption levels the playing field. Preparedness tilts it back in your favour.

Global trade conflicts in 2026 are real, significant, and not resolving quickly. US tariffs, EU green barriers, and China’s market disruption are compressing export revenue for Indian manufacturers across sectors.

The response isn’t panic. It’s precision. Use the schemes you’re entitled to. Protect your input margins. Upgrade your production capacity. Diversify your markets. Close your open licences. And stay ahead of every DGFT policy change before it becomes a deadline you miss.

The exporters who come out stronger from this period won’t be the ones who waited to see how it played out. They’ll be the ones who move first with the right advisory support behind them.

How are US tariffs affecting Indian exporters in 2026?

The US imposed tariffs of up to 50% on Indian goods in 2025. Between May and November 2025, exports to the US dropped 21%, particularly hurting textiles, gems, jewellery, and seafood. Exporters are diversifying markets and using US-origin inputs strategically to reduce tariff exposure.

What is the EU Carbon Border Adjustment Mechanism, and how does it affect India?

CBAM came into effect in January 2026. It imposes a carbon cost on steel and aluminium exported to Europe. Since Europe accounts for over 15% of India’s goods exports, this adds a compliance cost layer that steel and aluminium exporters now must manage.

Which DGFT schemes help offset global tariff pressure?

Advance Authorisation (duty-free raw material imports), EPCG Scheme (zero-duty capital goods imports), and RoDTEP (rebate of embedded taxes) are the three most effective schemes for protecting margins when export revenue is under tariff pressure.

What is China dumping, and how does it hurt Indian exporters?

After the US-China trade fell 30%, Chinese exporters cut prices by an average of 8% to find buyers in new markets, including Southeast Asia and Africa, where Indian exporters also compete. This undercuts Indian pricing in third markets outside the US.

Should Indian exporters review their DGFT licences during periods of global trade disruption?

Yes. Trade disruptions often expose existing compliance gaps that go unnoticed during stable periods. Exporters should review open EPCG and Advance Authorisation licences, pending export obligations, annual updates, and EODC status. Closing outdated or non-compliant licences can reduce regulatory risk, unlock bank guarantees, and improve readiness for new export opportunities.