India’s merchandise trade deficit moderated to USD 26.5 bn in Aug-25 from USD 27.4 bn in Jul-25.
Download ReportQuantEco Research | Aug-25 Merchandise Trade - The calm before the storm
India’s merchandise trade deficit moderated to USD 26.5 bn in Aug-25 from USD 27.4 bn in Jul-25. From an export perspective, Aug-25 witnessed three different rates of US tariffs, viz., 10%, 25%, and 50%, applicable on India sequentially. While evidence of front-loading of shipments continues to be reflected in the data, the picture is expected to change from Sep-25 onwards, as the punitive tariff rate of 50% becomes effective. If the singular penalty tariff of 25% extends for a longer period, then India could see erosion of its US export market share. Under this scenario, India’s current account deficit could rise towards 1.1-1.2% of GDP in FY26, vis-à-vis our existing forecast of 0.8%. On an optimistic note, there are some signs of thawing of the US-India trade relationship. The reported commencement of trade negotiations from Sep 16th, after its deferment in Aug, is encouraging. One hopes that this eventually culminates in a preliminary version of the India-US Bilateral Trade Agreement, along with the rationalization of the tariffs imposed on India.