NEW DELHI: Engineering goods rarely grab the limelight in India’s export story, despite accounting for the largest share of overall exports at 27-28% and contributing around 40% of manufactured goods shipments. The reason lies in the sheer diversity of the basket, which spans assorted metal and steel products, machinery, automobiles, auto parts, defence equipment and even aircraft parts. With no single industry dominating the segment, engineering goods exporters lack the visibility enjoyed by more narrowly defined sectors. Yet, they have scripted the smartest turnaround story in the face of a sustained tariff assault by the Trump administration over the last year and more.
More compellingly, after engineering goods exports to the US contracted by double digits in September-October last year due to a 50% additional tariff, shipments to that country recovered quickly. In April-August this year, exports to the US accelerated further and clocked an impressive 15.5% growth to $9.97 billion, with shipments surging 31% in August. The rate of expansion is even higher than before the tariff onslaught began.
A 50% products-specific tariff on steel and aluminum items failed to retard the export momentum. “We are able to manage (US business). The 50% levy is for all countries, so the US buyers have practically no choice but to adjust for it. Their buying power must have reduced marginally,” said Avinash Gupta, an exporter of steel forgings.
Smart shipment strategy and willingness on the part of suppliers in India and customers in the US to take the temporary hit on the margins helped the engineering-sector exporters to withstand the tariff incidence and uncertainties over it. Those who manage to get into the supply chains of the US are difficult to replace at short notice, said Arun Kumar Garodia, Managing Director of Corona Steel and immediate past president of the Engineering Export Promotion Council (EEPC).
Unless competitors offer a very compelling price, customers would not normally shift because it isn’t easy to rebuild supply systems and logistics with new suppliers.
Yet, the healthy export figures mask certain ground realities. To a large extent, the higher export values reflect global price spikes, which have jacked up India’s import costs. Net exports are therefore much narrower than headline figures indicate. “Our exports to the US are now negligible. High freight costs have become a constraint. The export data might be reflecting auto exports and the like. The situation is grimmer for MSMEs like us,” said Khalid Khan, a Mumbai-based exporter of engine parts.
While auto parts and copper products also attract a 50% tariff under Section 232 of the US Trade Expansion Act of 1962, US demand continues to be price inelastic.
Diversification also helped overall shipments, with overall exports from the sector growing 4.9% to $ 122.43 billion. In 2025-26 the Chinese market grew 32.4%, Germany 14.6%, UK 18.2%, and Italy 16%. Korea, Japan, Brazil and the Netherlands also grew in double digits. “We ae trying to get into the European, UK and Canadian markets, Gupta said. For steel goods, India has secured a comortable country-specific tariff-rate quota of 1.9 million tonnes (MT) from the European Union (EU). Shipments within these quotas enter the customs union at 0% duty, while any exports exceeding the limit faces a 50% tariff.
Exporters expect the growth rates seen in the past five months to continue or even gather more steam. “There is a steady demand from the US,” managing partner at Jyoti Steel Industries and Chairman of EEPC Pankaj Chadha said. Last year, too, exporters continued shipping products at a discount to reduce the tariff impact on the importers to maintain their market presence despite high tariffs, even though their margins took a hit. The 50% tariffs remained in force from late August 2025 to early February 2026.
Another mechanism many exporters worked out was sometimes sharing the impact of the 50% tariffs with their US buyers, said S C Ralhan, managing director of Sri Tools and President of the Federation of Indian Export Organisations. With the refund process for these tariffs having started, exporters expect importers to share the refunds with them, as agreed in many cases, he said, adding that the process remains very slow. In some cases sellers sent out goods even at a loss to remain embedded in the US supply chain and maintain export pace.
Source: The Financial Express
