Opinion: India turns to FTAs as US tariffs bite

In the presence of Prime Minister Narendra Modi and Oman’s Sultan Haitham bin Tarik, India signed the Comprehensive Economic Partnership Agreement (CEPA) with Oman in Muscat on December 18. Officials estimate that over $3 billion worth of Indian exports could become tariff-free after the pact comes into force, offering immediate relief for the export of merchandise goods and services.But back in India, including the industrial belts of Punjab and Haryana, exporters are still grappling with the aftershocks of an unprecedented 50 per cent US tariff that has upended business plans in the region’s most iconic sectors. This contrast — big-picture statecraft and on-the-ground distress — captures the new reality of India’s trade politics.In Panipat, known as India’s ‘Textile City’, the industry that once hummed with orders for carpets and home textiles now feels it’s on life support. Around 60 per cent of Panipat’s exports traditionally went to the US. But since the Trump’s regime slapped a cumulative 50 per cent tariff on Indian imports, buyers have largely disappeared. “No new orders are coming from US buyers,” laments an exporter. “We are now scrambling to find markets in Europe, South America, anywhere but the US.”Companies that once supplied big retail chains have begun cutting shifts and laying off workers. That’s the livelihood of thousands in a cluster worth nearly Rs 20,000 crore in annual exports. Many MSMEs with thin margins report that their inventories are piling up, credit cycles stretching by months and staff scrambling to stay afloat as US orders stagnate or evaporate.Ludhiana's textile sector as also auto component manufacturers and tool makers face a similar dilemma. These firms have traditionally plugged into American supply chains for hand tools, machinery and auto parts. After the tariff hike, several exporters have confided that they risk losing competitiveness to China and Vietnam, where tariff rates remain significantly lower. “It feels like we’ve been pushed into an economic war,” said a Ludhiana exporter. “Our products had a foothold in the US because we were competitive on price and quality. With 50 per cent duty, that advantage simply disappears,” he said.Analysts warn that eight major sectors — from footwear and steel to engineered goods and leather — are feeling the blow in Haryana. Punjab’s basmati rice exporters fear losing ground to Pakistani rivals, who enjoy much lower US duties. Hundreds of small firms across the region are now forced to pivot. They are exploring markets in Asia, Africa, the Gulf and South America even as access to these markets remains far from guaranteed.This is the everyday cost of a trade policy that suddenly weaponises tariffs without warning. The steep US tariffs imposed earlier this year hit labour-intensive Indian exports hard. They include textiles, metals, auto components and engineering goods sectors. For such firms in Punjab, Haryana and beyond, global strategy translates into cash-flow crises, layoffs and, in some cases, even the risk of closure.While India’s overall export numbers have shown resilience, the pain in the affected sectors has been real and uneven. Negotiations for a bilateral trade agreement with Washington have dragged on, complicated by geopolitical differences, including India’s continued purchase of discounted Russian crude oil.Trump's stance has sent a clear message to India that still counts the US as its largest export market: that access can no longer be taken for granted. New Delhi has responded with swiftness. India is accelerating free trade agreements (FTAs) with a number of countries.Against this backdrop, the Oman CEPA is a tactical win. With Oman providing India duty-free access to 98% of its tariff lines, Indian manufacturers will get a breathing space and a chance to reroute goods through a Gulf hub that can serve Africa and parts of Europe.But the Oman market alone does not absorb the scale of goods that once flowed to the US. The real test will be whether Indian exporters can use such FTAs to rebuild relationships in markets that demand quality standards, efficiency, reliability and logistics capability. These are persistent domestic challenges that FTAs cannot fix by themselves.The CEPA and similar agreements with other partners like the EU or New Zealand represent a strategic hedging. India already has 15 FTAs covering 26 countries and preferential trade agreements with another 26. It is negotiating with over 50 more partners.But hedging alone does not deliver competitiveness. While tariffs are lowered on paper, the ground situation presents a grim picture. Indian firms face high logistics costs, compliance issues, limited testing infrastructure and financing gaps. Without addressing these systemic weaknesses, even tariff-free access will fail to convert into sustainable export growth.In Panipat and Ludhiana MSMEs, this gap is visible in stark relief: factories with orders go unfulfilled because firms lack the agility to shift supply lines and meet buyer expectations in time. That is an economic challenge, not just a diplomatic one.The larger lesson from recent months is that trade policy can no longer be divorced from geopolitical risk. When tariffs are weaponised as instruments of political pressure, exporting nations must diversify markets and deepen trade ties beyond traditional partners. But diversification must be accompanied by domestic industrial reforms in infrastructure, finance, manufacturing policy, labour markets and technological upgradation. Only then will Indian goods become truly competitive.If India’s FTA push stops at signed agreements and tariff schedules, it will be just a tactical response to disruption. If it is accompanied by domestic transformation that equips firms in Haryana’s industrial belts, Punjab’s export hubs and across the country to compete globally, then the agreements will be more than just paper work. It will be a step towards reshaping India’s export future where trade strategy is grounded not just in diplomacy, but in real capability.

Opinion: India turns to FTAs as US tariffs bite

From Panipat to Ludhiana, US tariffs have turned global trade tensions into local job losses.

Harvinder Khetal

Opinion: India turns to FTAs as US tariffs bite

From Panipat to Ludhiana, US tariffs have turned global trade tensions into local job losses.

Harvinder Khetal

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