Indian businesses turn to UAE as US tariffs hit exports hard

Photo:Reuters

A major shift is underway in global trade as Indian companies start looking at the United Arab Emirates (UAE) to keep their businesses alive after fresh US tariffs. The new tariffs — announced earlier this year by US President Donald Trump — officially took effect today, August 27, and they are already shaking up export strategies in India.

Trump first imposed a 25% tariff on Indian goods shipped to the United States, one of India’s biggest markets. Soon after, he doubled the pressure by adding another 25% tariff on countries like India that purchase oil from Russia. That meant Indian exports would now face a massive 50% import duty in the US, making many products far too expensive for American buyers.

Businesses Look for Alternatives in the UAE

Consultants who help companies set up in the UAE say they have seen a surge in enquiries from Indian exporters ever since the US tariffs were announced. At first, many Indian businesses thought the tariffs were just a bargaining tactic from Washington and would be rolled back after negotiations. But when the second round of tariffs came, the reality sank in — the United States was closing its doors on a large part of Indian trade.

Now, Indian exporters are looking to the UAE, not just as a backup option but as a new trade base.

One business owner from the food processing sector, already working in Dubai, explained:

“When the first 25% tariff was announced, we thought it might be temporary. But once the second tariff came, and no talks happened between the US and India, we knew we had to explore the UAE more seriously. Many Indian companies are now asking us about joint ventures or shifting part of their production here.”

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Jewellery Trade Feels the Pressure

One of the hardest-hit sectors is India’s jewellery industry, a business worth billions and a major source of jobs. Gold, diamond, and gemstone jewellery made in India has always had a huge market in the United States. But now, with a 50% tariff, these products risk being completely priced out of the American market.

To survive, many jewellers are planning to set up design and production facilities in Dubai and Sharjah, where they can make the jewellery and then export it to the US with only 10% tariffs, instead of 50%. The catch? The products must meet “rules of origin” requirements — meaning at least 35–40% of the value must be added inside the UAE for them to qualify as UAE exports.

Tariffs Hit Labor-Intensive Sectors

Trade experts are warning that India’s most labor-intensive export sectors — textiles, garments, and small-scale engineering goods — face the toughest challenges. These sectors employ millions of workers and depend heavily on steady demand from US buyers. With tariffs doubling, many factories may lose contracts overnight.

Stephen Innes, Managing Director at SPI Asset Management, described it bluntly:

“This is not just a tariff — it’s like an eviction notice from the US market, a place Indian exporters have depended on for decades.”

The Bigger Economic Picture

The impact of the new tariffs has already hit India’s economy. On August 26, the Indian rupee dropped and the Sensex stock index fell by over 1%. Markets in India remained closed on August 27 for Ganesh Chaturthi, but experts believe volatility will continue as companies calculate losses and investors watch closely.

Pharmaceuticals and technology exports, however, were spared from tariffs. That means Apple can continue exporting iPhones made in India to the US without extra duties.

UAE as the New Trade Gateway

The UAE has long attracted Indian businesses, especially in textiles, chemicals, pharmaceuticals, and IT services. With the new tariff crisis, this interest has grown even stronger.

Experts say that to avoid US tariffs, Indian companies must ensure that part of their production really happens inside the UAE. This could mean:

* Moving the final stages of manufacturing or assembly to UAE factories.

* Setting up packaging and distribution centers in Dubai.

* Forming joint ventures with UAE firms to meet local content rules.

According to industry consultants, Indian firms made up about 5% of all business setup enquiries in the UAE this year, but that number is expected to grow fast.

Krishnan Ramachandran, a financial expert, explained:

“If Indian jewellers and manufacturers shift part of their production to the UAE, they will face only 10% tariffs when exporting to the US. But this will work only if value addition is done in the UAE itself.”

Early Movers Already in Advantage

Many Indian companies already have a strong base in the Gulf. Textile and garment makers, metal producers, and IT service providers in Dubai and Sharjah are now better placed to handle the crisis. They can quickly expand operations, meet the rules of origin, and continue shipping to the US at lower tariff rates.

Venkatesh Santhanam, a long-time trade advisor in Dubai, said:

“Businesses are recalibrating their supply chains to meet these requirements. Many are relocating final-stage production, building packaging facilities, or forming new partnerships in the UAE. The early movers will benefit the most.”

The Road Ahead

This tariff battle is forcing Indian exporters to rethink decades of trade practices. For years, India’s competitive advantage was its low-cost labor and large-scale production, especially for the US market. Now, companies must spend more on foreign facilities, logistics, and compliance costs.

But for the UAE, this crisis may turn into an opportunity. By offering business-friendly policies, tax advantages, and strategic shipping access, Dubai and Abu Dhabi could become the new hub for Indian exports to America.

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