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When US President Donald Trump announced sweeping “reciprocal tariffs” earlier in April – a blanket 10% on all imports and a specific 26% levy on Indian goods – reactions were swift. There were stock market jitters and headlines warning of shocks to the information technology and pharmaceutical sectors.
But behind this global disruption lies a deeper domestic reckoning: India’s vulnerability to trade shocks stems as much from geopolitics and as from its own regional economic imbalances.
If India wants to insulate itself from future volatility and become a resilient export power, it must confront the uncomfortable truth that the country’s internal trade map is skewed.
India’s export success is heavily concentrated in some states. Gujarat alone accounts for over 33.5% of total exports, together with Maharashtra, Tamil Nadu, and Karnataka, that figure goes up beyond 70%. These few states carry the burden of global exposure and are also immediately affected by Trump’s new tariffs.
By contrast, India’s most populous states – Uttar Pradesh, Bihar, Madhya Pradesh, and Rajasthan – contribute marginally. Exports from Uttar Pradesh form 4.97% of the national total. Madhya Pradesh and Rajasthan fare worse, at around 2.15%. This disparity isn’t due to size or lack of resources but political will and structural inertia.
Gujarat’s edge lies in a sustained focus on special economic zones, logistics and investment clarity. But much of North India leans on central transfers and welfarism rather than building productive ecosystems.
In even greater contrast is the exclusion of North East India. Despite sharing international borders of over 5,400 km, the region accounts for 0.13% of India’s exports. States like Nagaland, Mizoram, and Arunachal Pradesh are logistically isolated, lacking dry ports, trade corridors and even functional warehousing.
It’s not that the North East lags behind other parts of India – it’s that it has never been integrated.
Skewed equation
The 26% tariff, framed as retaliation against the “52%” average tariff barrier charged by New Delhi, reflects a deeper frustration: the $46-billion trade deficit the US runs with India.
Nearly 18% of India’s exported goods go to the US. Trump’s tariffs disproportionately affect India’s top-performing export sectors – pharmaceuticals, telecom equipment and jewellery, which together accounted for $17.8 billion of India’s total $77.8 billion exports to the US in 2023-’24. These industries are mainly located in Maharashtra, Tamil Nadu, and Gujarat.
Unless the Centre addresses this over-reliance on a few states and brings the rest of the country into the export equation, its response, whether tariff renegotiation or supply chain diversification, risks being performative.
Despite its geopolitical relevance, the North East is largely absent from this conversation. States like Manipur and Mizoram, literal frontiers to South East Asia, are economically excluded – they’re not just missing from export statistics but the table where export policy is made.
As analyst Ankur Sharma noted, US tariffs will have “both short-term and long-term implications for India’s economy, trade relations, and currency markets” especially if India fails to increase export efficiency and value addition.
That task now falls on a few already stretched states.
Two paths, one choice
Trump’s tariffs expose two distinct fault lines in India’s economic federalism. For the Hindi heartland, the path must be reform. States like Uttar Pradesh and Madhya Pradesh are victims of political complacency. Labour flexibility, land use reform, industrial zoning and energy access remain weak across the board. The NITI Aayog’s Export Preparedness Index repeatedly ranks these states low in trade infrastructure and logistics performance.
The Centre must stop insulating these states with soft transfers and start linking funding to land and labour policy reforms, logistics outcomes and export diversification. Rajasthan’s Rs 1.5 lakh-crore export target by 2029 under its new policy proves that ambition is not limited by geography, only by governance.
For the North East, the answer is empowerment. Despite repeated declarations of India’s “Act East” policy and that the country must use the North East as a springboard for ties with South East Asia, states such as Mizoram and Arunachal still do not have a single functional trade corridor to countries they share borders with.
The Kaladan Multimodal Project, aimed at connecting Kolkata with Myanmar by sea, and the India-Myanmar-Thailand Trilateral Highway are stalled or underutilised. In towns such as Imphal or Aizawl, urban governance and trade infrastructure are still not connected to national priorities.
India could benefit from a North East Trade Integration Mission: focused investment in border infrastructure, warehousing, agro-based enterprises, and most importantly, a policy seat for North East states in national trade strategy.
The country’s current export model treats the North as politically untouchable and the North East as an afterthought. This is no longer tenable. India must move from cooperative federalism to performance federalism, which rewards reform, enforces accountability and builds institutional capacity where it’s lacking.
The North must be pushed respectfully but firmly into the 21st-century economy. The North East must be brought in, not as a symbolic borderland, but as a strategic economic zone. Trade integration must happen not through speeches, but through policy, infrastructure and representation.
What’s at stake is not just export volumes. It is India’s economic coherence.
Sangmuan Hangsing is a public policy student at the Kautilya School of Public Policy.
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