High U.S. tariffs on Indian goods are not just slowing down air freight volumes entering the U.S. The 50-percent duties are driving down demand on the ocean trade, thus collapsing freight rates on the India-to-U.S. shipping route.
According to data from Platts, a part of S&P Global Commodity Insights, ocean freight rates for cargo carried from the Indian subcontinent to East Coast North America averaged $2,000 per 40-foot equivalent (FEU) as of Sept. 4., down 33 percent from $3,000 per FEU on July 3.
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A Journal of Commerce report Friday indicated that these rates could weaken to $1,500 to $1,600 per 40-foot container by mid-October if a new trade deal is not struck.
Capacity utilization for sailings out of West Indian ports destined for the U.S. East Coast have fallen significantly, according to the Journal of Commerce report. While levels for major carrier networks exiting ports like Nhava Sheva and Mundra normally range between 80 percent to 90 percent, this reported range has now fallen to between 60 percent and 70 percent.
Carriers on the trade lane are working around the contracting utilization by blanking sailings and adjusting schedules. Platts reported that Ocean Network Express (ONE), CMA CGM and Hapag-Lloyd have all blanked sailings out of India in September, with shipping companies expecting to bring smaller vessels into the trade lane to compensate for the lower volumes.
As ocean carriers adapt to the changes in India, air freight keeps nosediving.
According to weekly figures and analysis from WorldACD Market Data released Saturday, chargeable weight from India to the U.S. dropped 8 percent in the week of Sept. 8-14. The weekly decline came after two straight weeks of double-digit demand declines, in which the volumes slumped by 12 percent and 11 percent, respectively.
The downturn followed a 28 percent spike the week prior, when the U.S. doubled its tariff rate on imports from India to 50 percent.
The latest declines take weekly tonnages from India to the U.S. to 14 percent below their average of the last three months.
Air cargo tonnages from India to the U.S. had generally been up, year over year, in recent months, according to WorldACD, in part due to pressure on U.S. importers to seek alternatives to Chinese suppliers.
But the first two weeks of September have swung annual numbers to declines. When compared to the equivalent weeks last year, tonnage is down 13 percent and 10 percent, respectively.
Although air cargo volumes from India to Europe had increased over the three-week stretch since the U.S. tariffs were put in place, they dipped 1 percent in the week to Sept. 14.
Like the ocean rates, air freight rates out of the region have fallen in kind. According to the Freightos Air Index, South Asia to North America rates have fallen 13 percent since July to $4.18 per kg while prices to Europe have dipped just 2 percent to $2.92 per kg.
Regardless of how these goods was getting to the U.S., the tariffs did a number on India’s export economy throughout August.
India’s total exports to the U.S. have deteriorated 22.3 percent from May to August, from $8.8 billion to $6.9 billion. On a one-month basis, exports declined 14.3 percent from July, when importers had rushed goods out of the country ahead of the Aug. 1 deadline for countries to negotiate a new trade deal with the U.S.
Exports out of the textiles and readymade garments (RMG) sector fell 9.3 percent to $943.7 million over the summer, with different subsectors seeing varied impacts.
Apparel exports, including knitted and crocheted garments as well as woven fabrics, plunged 14.3 percent to $441.9 million. Knitted apparel decreased 6.7 percent, while non-knitted apparel fell 22.2 percent.
More specific items saw even larger declines, as highlighted by India-based Global Trade and Research Initiative, which noted that exports of girls’ suits tanked 45.4 percent and cotton dresses plummeted 66.7 percent.
As the numbers continue their decline, apparel goods have an even higher tariff rate than most products due to separately applied most-favored nation (MFN) duties. Knitted apparel has a 63.9 percent tariff when including the MFN duty, while woven apparel holds a 60.3 percent rate.
Beyond India, the tariffs are impacting trade for other garment producing countries, including Thailand, which exports 40 percent of its apparel to the U.S.
Yosthon Kitkuson, president of the Thai Garment Manufacturers Association (TGMA) and chair of the Textile and Garment Trade Association under the Thai Chamber of Commerce, urged the country’s new government to accelerate negotiations for a Thailand-European Union Free Trade Agreement.
Garment exporters in the Southeast Asian country argue such a deal would help mitigate their competitive disadvantage against Vietnam, which already has an agreement in place with the E.U.
Thailand’s exports to the U.S. have a 29 percent tariff as of August, while exporters face E.U. tariffs ranging from 10 percent to 20 percent.
The chair also called for a pause on minimum wage hikes, noting that garments remain a labor-intensive sector employing 600,000 to 800,000 workers. According to Kitkuson, wage increases throughout 2025 that accelerated to as much as 400 baht ($12.60) per day disproportionately affect new and unskilled workers whose productivity remains low, increasing costs for employers.
