US Tariffs on Indian Goods Cause Major Drop in Air Cargo Demand

Post by : Meena Rani

In late August 2025, the United States significantly increased tariffs on Indian goods. The tariff rate was raised from 25% to 50%, affecting a wide range of products exported from India. This move was a response to India’s continued purchase of Russian oil, which the U.S. viewed as contrary to its international sanctions policy. The immediate effect of this decision was a notable slowdown in air cargo exports from India to the United States, which had been one of India’s major trading partners.

Air cargo shipments play a crucial role in India’s trade with the U.S., especially for perishable goods, textiles, electronics, and pharmaceutical products. The sudden increase in tariffs has caused significant disruption to this trade, affecting not only exporters but also logistics providers, freight forwarders, and air cargo carriers.

Surge Before the Tariff Hike

In the days leading up to the tariff increase, Indian exporters rushed to ship goods to the U.S. before the higher duty took effect. This led to a sudden spike in air cargo volumes. Data from freight tracking organizations showed a 28% increase in shipments in the week before the tariffs were applied. Companies were keen to avoid paying the extra 25% duty, so they accelerated shipments, often at higher costs, to ensure that goods left India on time.

This surge, however, was only temporary. Once the new tariffs came into force on August 27, 2025, the market quickly adjusted, and cargo volumes began to drop sharply. The short-term increase highlighted how sensitive exporters are to tariff changes and how quickly trade patterns can change in response to government policies.

Sharp Decline in Air Cargo

After the implementation of the 50% tariffs, the air cargo market faced a sudden and steep decline. In the first week after the tariffs, shipments from India to the U.S. fell by 12%, according to industry data. In the following week, the decline worsened, with an additional 14% drop in cargo volumes.

This sharp decrease reflects the immediate economic impact of the tariffs. Exporters who had previously relied heavily on the U.S. market were forced to reconsider their business strategies. Many companies reported canceled orders or reduced shipments as U.S. buyers delayed purchases due to higher costs. The combined effect of these factors led to an unprecedented slowdown in air cargo from India.

Exploring Alternative Markets

In response to the decline in exports to the U.S., Indian exporters are increasingly looking to other markets. Europe has emerged as one of the primary alternatives. Air cargo shipments from India to Europe increased by 8% in the week ending September 6, compared to the same period last year.

Exporters are now diversifying their trade routes to reduce dependency on the U.S. market. Products that were traditionally shipped to the U.S. are now being redirected to countries in Europe, the Middle East, and Southeast Asia. This shift is not only a response to tariffs but also a long-term strategy to stabilize trade and ensure smoother logistics in the future.

Economic Implications

The decline in air cargo exports is just one aspect of the broader economic impact of the U.S. tariffs. The Chief Economic Advisor of India, V. Anantha Nageswaran, has warned that the increased duties could reduce India’s GDP growth by 0.2% to 0.3% in the current fiscal year.

The tariffs affect not only exporters but also the domestic supply chain. Airlines, freight forwarders, warehousing companies, and trucking firms all experience increased costs and reduced volumes, which can lead to layoffs or slower expansion plans. Additionally, Indian businesses face higher costs when shipping goods to the U.S., which may reduce their competitiveness in the international market.

Industry Responses and Strategies

Indian industry associations have called for urgent negotiations with the U.S. to reduce the impact of the tariffs. Exporters are seeking solutions such as tariff exemptions, revised trade agreements, or temporary relief measures to sustain business.

Meanwhile, air cargo carriers are adjusting their flight schedules and cargo space allocation to cope with the reduced shipments to the U.S. Some carriers are offering more space for European destinations, while others are introducing discounted rates to keep cargo moving.

The logistics sector is also investing in digital solutions and advanced tracking systems to improve efficiency. By optimizing routes and reducing turnaround times, companies hope to offset some of the financial losses caused by the tariffs.

Global Trade and Diplomatic Talks

The increase in tariffs has also prompted diplomatic discussions between India and the U.S. Officials from both countries are exploring ways to resolve the dispute. These talks aim to balance India’s energy needs, its trade interests, and the U.S. sanctions policy.

Analysts suggest that the outcome of these negotiations will play a key role in shaping the future of India-U.S. trade relations. If a resolution is reached, air cargo exports could recover over the next few months. However, if talks stall, Indian exporters may continue to face challenges, and long-term adjustments to supply chains may become necessary.

The U.S. tariffs on Indian goods serve as a reminder of how global trade policies can directly impact businesses, logistics, and national economies. Indian exporters, logistics providers, and policymakers are now navigating a complex landscape, balancing the need to maintain trade with the U.S. while exploring new markets and strategies.

While the immediate effect has been a sharp drop in air cargo shipments, the long-term outcome will depend on the ability of exporters to adapt, diversify, and respond to international trade changes. The experience highlights the importance of flexibility in global trade and the need for strong diplomatic engagement to protect economic interests.

US tariffs, India air cargo, trade dispute, export decline, economic impact